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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report JULY 18, 1997
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HEALTHCARE FINANCIAL PARTNERS, INC.
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(Exact Name of Registrant as Specified in Charter)
DELAWARE 0-21425 52-1844418
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(State or Other Jurisdiction (Commission) (IRS Employer
of Incorporation) File Number) Identification No.)
2 WISCONSIN CIRCLE, SUITE 320, CHEVY CHASE, MARYLAND 20815
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (301) 961-1640
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NOT APPLICABLE
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(Former Name or Former Address, if Changed Since Last Report)
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On June 27, 1997, HealthCare Financial Partners, Inc., a Delaware
corporation (the "Registrant"), HCFP Funding II, L.P., a Delaware corporation
(the "Subsidiary") and Wisconsin Circle II Funding Corporation, a Delaware
corporation ("Wisconsin II"), a wholly owned subsidiary of the Subsidiary,
entered into a series of agreements with Credit Suisse First Boston Mortgage
Capital, LLC ("CSFB") and First Trust of New York, National Association (the
"Trustee") to securitize certain loans under the Registrant's Secured Term Loan
("STL") Program. The Registrant's STL Program offers loans to small to middle
market health care companies secured by certain assets, including accounts
receivable, inventory, real estate and stock. Under these agreements, STL
Program loans originated by the Subsidiary which meet certain criteria set forth
therein may be transferred to Wisconsin II, a single purpose bankruptcy remote
corporation, and subsequently sold to a trust. The purchase price for the loans
would be provided in part by CSFB through the purchase of certificates of
participation issued by the trust. The principal amount of the certificates of
participation purchased by CSFB may not exceed 88% of the principal amount of
STL Program loans held by the trust, subject to a $50 million maximum. Interest
will accrue on the certificates of participation at a rate equal to LIBOR plus
3.75%.
Under these agreements, Wisconsin has the right to re-purchase any assets
sold to the trust (the "Call") at a price equal to the fair market value of such
assets. As a result of the Call, this series of transactions will be treated as
a financing rather than a sale of assets on the consolidated financial
statements of the Registrant. The obligations of the Subsidiary under these
agreements to service the assets held by the trust have been guaranteed by the
Registrant until the Subsidiary obtains a tangible net worth of at least $20
million for a period of one year. A copy of the Purchase and Sale Agreement,
Certificate Purchase Agreement, Pooling and Servicing Agreement, Appendix of
Definitions and Guarantee evidencing the transactions described above are
attached hereto as exhibits, are incorporated by reference herein, and the
foregoing description is qualified in its entirety by reference to such
exhibits.
On June 30, 1997, the Subsidiary acquired all of the limited partnership
interests of HealthPartners Investors, LLC, a Delaware limited liability
company, in HealthCare Financial Partners - Funding II, L.P., a Delaware limited
partnership (the "Partnership") for $15.5 million. The Subsidiary was previously
the managing general partner of the Partnership, which was formed pursuant to a
partnership agreement, as amended and restated, dated as of March 5, 1997. As of
the acquisition, the Partnership had $14,790,809.77 in assets, consisting
principally of STL Program loans, and Partnership equity of $14,075,719.76. A
copy of the Assignment and Assumption Agreement evidencing such acquisition is
attached hereto as an exhibit, is incorporated by reference herein, and the
foregoing description is qualified in its entirety by reference to such exhibit.
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Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
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(c) Exhibits
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10.15 Purchase and Sale Agreement dated as of June 27, 1997 between
HCFP Funding II, Inc., as Seller, and Wisconsin Circle II
Funding Corporation, as Buyer
10.16 Pooling and Servicing Agreement dated as of June 27, 1997 among
Wisconsin Circle II Funding Corporation, as Transferor, HCFP
Funding II, Inc. as Servicer and First Bank National
Association, as Trustee
10.17 Certificate Purchase Agreement dated as of June 27, 1997 among
Wisconsin Circle II Funding Corporation, as Transferor, and the
Purchasers described therein
10.18 Appendix - Definitions
10.19 Guarantee by HealthCare Financial Partners, Inc.
99.2 Assignment and Assumption Agreement by and among HealthPartners
Investors II, LLC, HCFP Funding, Inc., and HealthCare Financial
Partners, Inc.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
HEALTHCARE FINANCIAL PARTNERS, INC.
Date: July 17, 1997 By: /s/ Edward P. Nordberg, Jr.
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Edward P. Nordberg, Jr.
Executive Vice President
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EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
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10.15 Purchase and Sale Agreement dated as of June 27, 1997 between
HCFP Funding II, Inc., as Seller, and Wisconsin Circle II Funding
Corporation, as Buyer
10.16 Pooling and Servicing Agreement dated as of June 27, 1997 among
Wisconsin Circle II Funding Corporation, as Transferor, HCFP Funding
II, Inc. as Servicer and First Bank National Association, as Trustee
10.17 Certificate Purchase Agreement dated as of June 27, 1997 among
Wisconsin Circle II Funding Corporation, as Transferor, and The
Purchasers described therein
10.18 Appendix - Definitions
10.19 Guarantee by HealthCare Financial Partners, Inc.
99.2 Assignment and Assumption Agreement by and among HealthPartners
Investors II, LLC, HCFP Funding, Inc., and HealthCare Financial
Partners, Inc.
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EXHIBIT 10.15
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PURCHASE AND SALE AGREEMENT
dated as of June 27, 1997
between
HCFP FUNDING II, INC.,
as Seller
and
WISCONSIN CIRCLE II FUNDING CORPORATION,
as Buyer
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TABLE OF CONTENTS
Page
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ARTICLE I
AGREEMENT TO PURCHASE AND SELL
SECTION 1.1 Agreement to Purchase and Sell...................... 1
SECTION 1.2 Timing of Purchases................................. 2
SECTION 1.3 Consideration for Purchases......................... 2
SECTION 1.4 No Recourse......................................... 3
SECTION 1.5 No Assumption of Obligations Relating to
Receivables and Related Assets...................... 3
SECTION 1.6 True Sales.......................................... 3
SECTION 1.7 Evidencing Purchases................................ 3
ARTICLE II
PURCHASE REPORTS; CALCULATION OF PURCHASE PRICE
SECTION 2.1 Purchase Reports.................................... 6
SECTION 2.2 Calculation of Purchase Price....................... 6
ARTICLE III
PAYMENT OF PURCHASE PRICE; SERVICING, ETC.
SECTION 3.1 Purchase Price Payments............................. 6
SECTION 3.2 Servicing of Receivables and Related Assets......... 7
ARTICLE IV
CONDITIONS TO PURCHASES
SECTION 4.1 Conditions Precedent to Initial Purchase............ 7
SECTION 4.2 Certification as to Representations and Warranties.. 8
SECTION 4.3 Effect of Payment of Purchase Price................. 8
ARTICLE V
REPRESENTATIONS AND WARRANTIES
SECTION 5.1 General Representations and Warranties of Seller.... 8
SECTION 5.2 Representations and Warranties of Buyer............. 3
ARTICLE VI
GENERAL COVENANTS OF SELLER
SECTION 6.1 Affirmative Covenants............................... 3
SECTION 6.2 Reporting Requirements.............................. 6
SECTION 6.3 Negative Covenants.................................. 8
ARTICLE VII
ADDITIONAL RIGHTS AND OBLIGATIONS IN
RESPECT OF THE PURCHASED ASSETS
SECTION 7.1 Rights of Buyer..................................... 9
(i)
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SECTION 7.2 Responsibilities of Seller.......................... 20
SECTION 7.3 Further Action Evidencing Purchases................. 20
ARTICLE VIII
[RESERVED].............................................................. 21
ARTICLE IX
INDEMNIFICATION AND REPURCHASE OBLIGATIONS
SECTION 9.1 Indemnities by Seller............................... 21
ARTICLE X
MISCELLANEOUS
SECTION 10.1 Amendments; Waivers, Etc............................ 23
SECTION 10.2 Notices, Etc........................................ 23
SECTION 10.3 Cumulative Remedies................................. 24
SECTION 10.4 Binding Effect; Assignability; Survival of
Provisions......................................... 24
SECTION 10.5 Governing Law....................................... 24
SECTION 10.6 Costs, Expenses and Taxes........................... 24
SECTION 10.7 Submission to Jurisdiction.......................... 24
SECTION 10.8 Waiver of Jury Trial................................ 25
SECTION 10.9 Integration......................................... 25
SECTION 10.10 Counterparts........................................ 25
SECTION 10.11 Acknowledgement and Consent......................... 25
SECTION 10.12 No Partnership or Joint Venture..................... 26
SECTION 10.13 No Proceedings...................................... 26
SECTION 10.14 Severability of Provisions.......................... 26
SECTION 10.15 Recourse to Buyer................................... 26
EXHIBITS
EXHIBIT A Form of Revolving Credit Agreement
EXHIBIT B Form of Seller Assignment Certificate
EXHIBIT C Form of Assumption Agreement
EXHIBIT D Form of Buyer's Articles of Incorporation and Bylaws
EXHIBIT E Seller's Statement of Policy and Procedures
SCHEDULES
SCHEDULE 1.1(a) Eligible Receivables as of Initial Cut-Off Date
SCHEDULE 5.1(f) Litigation and Other Proceedings
SCHEDULE 5.1(h) Offices of Seller where Records are Maintained
SCHEDULE 5.1(q) Legal Names, Trade Names and Names Under Which the
Companies Do Business
SCHEDULE 5.1(t) Software Programs and Licenses
(ii)
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This Purchase and Sale Agreement, dated as of June 27, 1997 (this
"Agreement"), is made between HCFP FUNDING II, INC., a Delaware corporation
("Seller"), and WISCONSIN CIRCLE II FUNDING CORPORATION, a Delaware corporation
("Buyer").
Pursuant to the Pooling and Servicing Agreement dated as of the date hereof
(as amended, supplemented or otherwise modified from time to time, the "Pooling
Agreement"), Buyer intends to transfer its interests in the Receivables sold
pursuant hereto to the Trust in order to, among other things, finance its
purchases hereunder. Except as otherwise defined herein, capitalized terms have
the meanings assigned to them in Appendix A to the Pooling Agreement, and this
Agreement shall be interpreted in accordance with the conventions set forth in
Part B of such Appendix A.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, agree as follows:
ARTICLE I
AGREEMENT TO PURCHASE AND SELL
SECTION 1.1 Agreement to Purchase and Sell. (a) Seller hereby sells,
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transfers, assigns, sets over and conveys to Buyer, and Buyer agrees to purchase
from Seller, at the times set forth in Section 1.2, all of Seller's right, title
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and interest in, to and under:
(i) the Eligible Receivables of Seller that exist and are owing to Seller
as at the closing of Seller's business on the Initial Cut-Off Date,
(ii) subject to subsection (b) below, the Eligible Receivables created by
Seller that arise during the period from and including the closing of Seller's
business on the Initial Cut-Off Date to but excluding the Purchase Termination
Date,
(iii) all Related Security with respect to such Eligible Receivables of
Seller,
(iv) all proceeds of the foregoing, including without limitation all funds
received by any Person in payment of any amounts owed (including invoice prices,
finance charges, late fees, interest and all other charges, if any) in respect
of any Eligible Receivable described above or Related Security with respect to
any such Eligible Receivable, and otherwise applied to repay or discharge any
such Eligible Receivable or other collateral or property of any Obligor or any
other party directly or indirectly liable for payment of such Eligible
Receivables and originally pledged to Seller, and
(v) all Records relating to any of the foregoing.
(b) Except as provided in this paragraph, Seller shall use its best efforts
to assure that all Receivables that it generates are Eligible Receivables
qualifying for purchase by Buyer hereunder. The foregoing notwithstanding,
Seller may exclude from sale to the Buyer (i) Eligible ABL Receivables and (ii)
such other Receivables as Seller may elect at its option;
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provided, however, that any Receivables excluded pursuant to clause (ii) above
may not be sold or otherwise financed through a competing warehouse facility,
line of credit, or other form of financing arrangement or securitization
facility that is not sponsored, underwritten or otherwise created by Credit
Suisse First Boston Corporation or its Affiliate.
As used herein, (i) "Purchased Receivables" means the items listed above in
clauses (a)(i) and (a)(ii), (ii) "Related Purchased Assets" means the items
listed above in clauses (a)(iii), (a)(iv) and (a)(v), (iii) "Purchased Assets"
means, collectively, the Purchased Receivables and the Related Purchased Assets
and (iv) "Purchase Termination Date" means the earliest to occur of the
following:
(1) a Bankruptcy Event occurs;
(2) The Internal Revenue Service or the PBGC files one or more Tax or
ERISA Liens against the assets of Seller or Buyer (including Receivables),
and such liens are not removed within 30 days; or
(3) the Amortization Commencement Date.
SECTION 1.2 Timing of Purchases.
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(a) Initial Purchases. All of the Purchased Assets of Seller that exist at
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the closing of Seller's business on the Initial Cut-Off Date shall be sold to
Buyer on the Closing Date.
(b) Regular Purchases. Except as otherwise provided in Section 1.1 hereof,
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after the closing of Seller's business on the Initial Cut Off Date until the
closing of Seller's business on the Business Day immediately preceding the
Purchase Termination Date, all Purchased Receivables and the Related Purchased
Assets of Seller shall be sold to Buyer pursuant hereto immediately (and without
further action by any Person) on each Subsequent Closing Date, subject to (i)
Seller having provided Buyer and Required Person with a copy of its internal
underwriting analysis (together with applicable supporting materials) not less
than four (4) Business Days prior to the date of such proposed sale, (ii) Seller
providing Buyer and Trustee with two (2) Business Days' prior written notice of
such sale, and (iii) in the event such sale is to be funded by Buyer with
amounts drawn from Investor Certificateholders, such amounts meet the funding
conditions under the Certificate Purchase Agreements.
The foregoing paragraph notwithstanding, Buyer shall not purchase
Receivables from Seller while any default by Seller, irrespective of any grace
or cure periods, is pending under any Transaction Document, or while any amounts
are due from Seller under Article IX hereof; provided, that with the written
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consent of the Required Persons (which may be withheld in their sole
discretion), Buyer and Seller may credit any amounts due from Seller to Buyer
under Article IX hereof against the Purchase Price due Seller.
SECTION 1.3 Consideration for Purchases. On the terms and subject to
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the conditions set forth in this Agreement, Buyer agrees to make Purchase Price
payments to Seller in accordance with Article III.
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SECTION 1.4 No Recourse. Except as specifically provided in this
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Agreement, the sale and purchase of Purchased Assets under this Agreement shall
be without recourse to Seller; it being understood that Seller shall be liable
to Buyer for all representations, warranties, covenants and indemnities made by
Seller pursuant to the terms of this Agreement, all of which obligations are
limited so as not to constitute recourse to Seller for the credit risk of the
Obligors.
SECTION 1.5 No Assumption of Obligations Relating to Receivables and
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Related Assets. None of Buyer, any Servicer (in its capacity as Servicer),
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Trustee or any assignee thereof shall have any obligation or liability to any
Obligor or other customer or client of Seller. No such obligation or liability
is intended to be assumed by Buyer, any Servicer (in its capacity as Servicer),
Trustee, or any assignee hereunder, and any assumption thereof is expressly
disclaimed.
SECTION 1.6 True Sales. Seller and Buyer intend the transfers of
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Receivables hereunder to be true sales by Seller to Buyer that are absolute and
irrevocable and that provide Buyer with the full benefits of ownership of the
Receivables.
Buyer and Seller do not intend that the conveyance of the Purchased Assets
by Seller be deemed a grant of a lien on or security interest in the Purchased
Assets by Seller to Buyer to secure a debt or other obligation of Seller.
However, in the event that, notwithstanding the intent of the parties, any
Purchased Assets are property of Seller's estate, then (i) this Agreement also
shall be deemed to be and hereby is an assignment of mortgage and a security
agreement within the meaning of the UCC, and (ii) the conveyance by Seller
provided for in this Agreement shall be deemed to be a grant by Seller to Buyer
of, and Seller hereby grants to Buyer, a lien on and security interest in and to
all of Seller's right, title and interest in, whether now owned or hereafter
acquired, to and under the Purchased Assets to secure (1) the rights of Buyer
hereunder and (2) a nonrecourse loan by Buyer to Seller in the amount of the
related Purchase Price of the Purchased Assets sold by Seller to Buyer. Seller
and Buyer, to the extent consistent with this Agreement, shall take such actions
as may be necessary to ensure that if this Agreement were deemed to create a
lien on and security interest in the Purchased Assets, such security interest
would be deemed to be a perfected security interest of first priority (subject
to Permitted Adverse Claims) in favor of Buyer under applicable law ab initio
and will be maintained as such throughout the term of this Agreement.
SECTION 1.7 Evidencing Purchases. With respect to the Eligible STL
--------------------
Receivables secured in whole or in part by real property the Seller shall
deliver to the Buyer on the applicable Subsequent Closing Date the Mortgage File
for each Purchased Receivable and all escrowed funds held by the Seller with
respect to such Receivables. Each Mortgage File (the "Mortgage File") shall
contain the following documents:
(a) the original mortgage note, endorsed (either on the mortgage note
or to the extent permitted by applicable state law by an allonge annexed
thereto) without recourse in blank with all intervening endorsements
(either on the mortgage note or to the extent permitted by applicable state
law by allonge annexed thereto) showing a complete chain of endorsement
from the originator to Seller, and if the mortgage note or mortgage or any
other material document or instrument relating to the mortgage loan
has been signed on behalf of the mortgagor by another person under a power
of attorney, the original power of attorney or other instrument that
authorized and empowered such person to sign, or a copy of the original
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power of attorney or other instrument certified by the relevant public
recording office in those instances in which the public recording office
retains the original;
(b) the original mortgage (or a certified copy), and any intervening
assignment thereof (or a certified copy), in each case as recorded, with
evidence of recording indicated thereon;
(c) an original assignment of mortgage in recordable form signed by
the holder of record in blank;
(d) the original or certified copies of each guaranty, assumption,
modification, forbearance, written assurance, consolidation and extension
agreements, guarantee or substitution agreement, or any other written
agreement (including any management agreements currently in force), if any,
with respect to such mortgage loan, with evidence of recording, if any,
indicated thereon, as identified on the mortgage loan schedule; provided
that no such agreement need be recorded if Seller certifies the recording
thereof is not appropriate or recording is not customary.
(e) the original or certified copies of a security agreement, if any,
and, if there is any separate assignment of leases and/or rents, the
assignment of leases and/or rents relating to the mortgage loan, such
assignment of leases and/or rents to be in recordable form; and each
intervening assignment of assignment of leases and/or rents, if any, from
the original mortgagee to Seller, as recorded, and the assignment of
assignment of leases and/or rents from Seller in blank but otherwise in
recordable form;
(f) original UCC-2 or UCC-3 Assignments, as applicable, assigning the
interests in personal property security and any other collateral security
secured by all UCC-1 financing statements relating to the mortgage loan
from Seller signed in blank in form for filing in the applicable public
recording office;
(g) the original lender's title policy and all riders thereto, or, in
the event such original title policy has not been received from the
insurer, any one of an original title binder, an original preliminary title
report or an original title commitment, or a copy thereof certified by the
title company, and the escrow closing instructions specifying acceptability
of such document, with the original policy of title insurance to be
delivered promptly following receive thereof from the applicable insurer,
but in any case not later than 120 days after the closing date of such
mortgage loan;
(h) any and all amendments, modifications and supplements to, and
waivers related to, any of the foregoing; and
(i) any other documents, certificates, papers or records relating to
the mortgage loan in the possession of the Seller including, but not
limited to hazard insurance policies, surveys, appraisals, Phase I or
engineering reports, asset summaries, Mortgagor financials, audit work
papers, credit reports, certificates of occupancy, photographs, tax and
insurance receipts and correspondence, exclusive of documents prepared by
Seller or any of its affiliates solely
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for internal use; provided, however, that delivery of any such documents,
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certificates, papers or records described in this clause (i) to the
Servicer shall constitute compliance by Seller with its obligations under
this clause (i).
Notwithstanding the foregoing, in the event that, in connection with any
Mortgage Loan Seller cannot deliver an original recorded counterpart of any of
the documents required to be delivered in recorded form pursuant to clauses (b),
(c), (d), (e) or (f) above with evidence of recording thereon on the Closing
Date, Seller shall deliver, or cause to be delivered, to the Purchaser a
duplicate original or true copy of such document certified by Seller or the
applicable public recording office to be a true and complete duplicate original
or copy of the original thereof submitted for recording. With respect to
clauses (b), (c), (d), (e) or (f), Seller shall promptly deliver, or cause to be
delivered, to the Purchaser (A) such original document, with evidence of
recording indicated thereon, or a photocopy of such document certified by the
appropriate county recorder's office to be a true and complete copy of the
original thereof, upon receipt thereof from the public recording official, and
(B) upon discovery of any defect or omission in the deliveries of any of items
(b), (c), (d), (e), (f) or (h) above with respect to any Mortgage Loan, a
correct and complete document or instrument meeting the requirements of such
items or a certified copy thereof, certified by the relevant recording office,
but in no event shall any such delivery be made later than 120 days following
the Closing Date.
Notwithstanding the foregoing, in the event that Seller cannot deliver to
the Purchaser any UCC-2 or UCC-3 Assignment with the filing information of the
UCC-1 Financing Statement being assigned, solely because of a delay caused by
the public filing office where such UCC-1 Financing Statement has been delivered
for filing, Seller shall deliver or cause to be delivered to the Purchaser a
photocopy of such UCC-2 or UCC-3 Assignment with the filing information left
blank. Seller, promptly upon receipt of the applicable filing information of
the UCC-1 Financing Statement being so assigned, shall deliver to the Purchaser
the original UCC-2 or UCC-3 Assignment with all appropriate filing information
set forth thereon.
With respect to Eligible ABL Receivables and Eligible SDWW Receivables
Seller shall (i) obtain, execute and file such Public Notices and such other
instruments or notices, as Buyer or Servicer may reasonably determine to be
necessary or appropriate, and (ii) mark any records its retains evidencing the
Purchased Assets (including any Obligor Loan Agreements) with the following
legend:
THE RECEIVABLES DESCRIBED HEREIN HAVE BEEN SOLD TO WISCONSIN CIRCLE II
FUNDING CORPORATION ("BUYER") PURSUANT TO A PURCHASE AND SALE
AGREEMENT, DATED AS OF JUNE 27, 1997, AMONG HCFP FUNDING II, INC. AND
BUYER; AND SUCH RECEIVABLES HAVE BEEN TRANSFERRED TO THE STL 1997-1
TRUST PURSUANT TO A POOLING AND SERVICING AGREEMENT, DATED AS OF THE
SAME DATE, AMONG BUYER, AS TRANSFEROR, HCFP FUNDING II, INC. AS
THE INITIAL SERVICER, AND FIRST BANK NATIONAL ASSOCIATION, AS TRUSTEE.
5
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Seller hereby authorizes Buyer or its designee to file one or more Public
Notices relative to all or any of the Purchased Assets, in each case whether now
existing or hereafter generated by Seller.
Furthermore, upon request of Buyer or its assignees, Seller shall execute
such individual endorsements, assignments of security agreements, mortgages,
financing statements and other documents as the Buyer or Servicer, each in its
reasonable discretion, deems to be necessary or appropriate to effect or
evidence the transfer to Buyer of Seller's right, title and interest in the
Purchased Assets. Seller shall be responsible for the preparation of such
assignments, endorsements, assumptions and other documents or instruments and
the payment of any costs associated with such preparation. Buyer shall be
responsible for the recording of such assignments and for the payment of any
costs associated with such recording.
ARTICLE II
PURCHASE REPORTS; CALCULATION OF PURCHASE PRICE
SECTION 2.1 Purchase Reports. On each Subsequent Closing Date, Seller
----------------
shall deliver to Buyer and Trustee a purchase report (the "Purchase Report")
with respect to Seller's sale of Receivables to Buyer that are to be made on
each Subsequent Closing Date, as applicable (the "Designated Receivables").
Each Purchase Report shall (except as otherwise provided in Section 1.7) be
accompanied by the original instruments, if any, evidencing the Designated
Receivables and shall set forth (i) the aggregate face amount of the Designated
Receivables, (ii) the related Obligor for each of Designated Receivables and
(iii) the purchase price (the "Purchase Price") to be paid to Seller on each
Subsequent Closing Date, as applicable, with respect to the Purchased Assets
comprising or related to such Designated Receivables.
SECTION 2.2 Calculation of Purchase Price. The Purchase Price with
-----------------------------
respect to the Purchased Assets comprising or related to Designated Receivables
described in any Purchase Report shall be the fair market value of the
Receivables, shall be qual to the outstanding principal balance of the
applicable Receivable as of the applicable Subsequent Closing Date.
ARTICLE III
PAYMENT OF PURCHASE PRICE; SERVICING, ETC.
SECTION 3.1 Purchase Price Payments. The Purchase Price of Eligible
-----------------------
Receivables purchased from Seller by Buyer on the applicable Subsequent Closing
Date shall be paid by Buyer to Seller on the applicable Subsequent Closing Date,
(i) in cash, (ii) with the consent of Seller, which consent shall be in Seller's
sole discretion and which may be withheld by Seller for any reason or for no
reason, by means of capital contributed by Seller to Buyer, or (iii) with the
consent of Seller, which consent shall be in Seller's sole discretion and which
may be withheld by Seller for any reason or for no reason, any combination of
the foregoing.
SECTION 3.2 Servicing of Receivables and Related Assets. Consistent with
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Buyer's ownership of the Purchased Assets, as between the parties to this
Agreement, Buyer shall have the sole right to service, administer and collect
the Purchased Receivables, to assign the right and to delegate the right to
6
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others. Without limiting the generality of Section 10.11, Seller hereby
-------------
acknowledges and agrees that (i) Buyer may assign to Trustee for the benefit of
the Investor Certificateholders the rights and interests of Buyer hereunder,
(ii) Buyer may engage Seller under the Pooling Agreement to service the
Purchased Assets and (iii) Seller shall cooperate fully with Trustee in the
exercise of such rights and interests. As more fully described in Section 11.11
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and in the Pooling Agreement, Trustee may exercise the rights in the place of
Buyer (as assignee or otherwise). On or prior to each Subsequent Closing Date
on which Seller is selling Receivables to Buyer, Seller will (A) assemble all of
the Records that are necessary or appropriate to collect the Purchased Assets,
and shall make the same available to Trustee at one or more places selected by
Trustee or its designee, and (B) permit, upon not less than one (1) Business
Days' prior written notice, Trustee and any Investor Certificateholder and their
respective agents, employees and assignees access to its facilities and such
Records.
ARTICLE IV
CONDITIONS TO PURCHASES
SECTION 4.1 Conditions Precedent to Initial Purchase. The initial
----------------------------------------
purchase hereunder is subject to the conditions precedent that (i) each of the
conditions precedent to the execution, delivery and effectiveness of each other
Transaction Document (other than a condition precedent in any other Transaction
Document relating to the effectiveness of this Agreement) shall have been
fulfilled to the satisfaction of Buyer, (ii) CSFB shall have been paid the fee
then due under Section 10.17 herein, and (iii) Buyer shall have received each of
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the following, on or before the Closing Date, each (unless otherwise indicated)
dated the date hereof or the Closing Date and each (unless otherwise indicated)
in form and substance satisfactory to Buyer:
(a) Seller Assignment Certificate. A Seller Assignment Certificate from
-----------------------------
Seller in the form of Exhibit B, duly completed, executed and delivered by
---------
Seller,
(b) Resolutions. A copy of the resolutions of the Board of Directors of
-----------
Seller approving this Agreement and the other Transaction Documents to be
delivered by it hereunder and the transactions contemplated hereby and thereby
and addressing such other matters as may be required by Buyer, certified by its
Secretary or Assistant Secretary, each as of a recent date acceptable to Buyer,
(c) Good Standing Certificate of Seller; Certificates as to Foreign
---------------------------------------------------------------
Qualification of Seller. A good standing certificate for Seller, issued as of a
- -----------------------
recent date by the Secretary of State of: (i) the jurisdiction of its
incorporation and (ii) each state in which Seller does business and where the
failure so to be in good standing reasonably could be expected to have a
Material Adverse Effect.
(d) Incumbency Certificate. A certificate of the Secretary or Assistant
----------------------
Secretary of Seller certifying, as of a recent date reasonably acceptable to
Buyer, the names and true signatures of the officers authorized on Seller's
behalf to sign the Transaction Documents to be delivered by Seller (on which
certificate Buyer, Trustee and Servicer may conclusively rely until such time as
Buyer shall receive from Seller (with a copy to Trustee and Servicer), a revised
certificate meeting the requirements of this subsection),
7
<PAGE>
(e) Other Transaction Documents. Original copies, executed by each of the
---------------------------
parties thereto in such reasonable number as shall be specified by Buyer, of
each of the other Transaction Documents to be executed and delivered in
connection herewith, and
(f) License Agreements. Duly executed counterparts of (i) software license
------------------
agreements if Seller uses its own proprietary software in the origination or
servicing of Receivables or Related Assets, and (ii) amendments to any license
agreement between Seller and any third party vendor.
(g) Accountants' Report. Audited consolidated financial statements for the
-------------------
Guarantor's 1996 fiscal year, and unaudited financial statements for the quarter
ending March 31, 1997 prepared by Guarantor and audited in the case of the
audited statements, by Ernst & Young LLP, demonstrating, in each case, that
Guarantor has stockholders' equity of at least $20,000,000, and otherwise in
form and substance satisfactory to Buyer.
SECTION 4.2 Certification as to Representations and Warranties. Seller
--------------------------------------------------
(by accepting the Purchase Price paid for each Purchase) shall be deemed to have
certified with respect to all Purchased Assets to be sold on any day that its
representations and warranties contained in Article V are true and correct on
---------
and as of such day, with the same effect as though made on and as of such day
provided that if such representations and warranties are originally made with
respect to a date certain such date shall be deemed to be the date of such
Purchase and provided further that from and after the termination of the
Guarantee pursuant to Section 1.3 thereof, the representations and warranties
set forth in subsection (i) of Section 5.1 shall be deemed to be representations
as to the financial statements of Seller, which financial statements shall be
prepared on a basis that is not consolidated with Guarantor.
SECTION 4.3 Effect of Payment of Purchase Price. Upon the payment of
-----------------------------------
the Purchase Price for any Purchase (whether in cash or by a capital
contribution), title to the Purchased Assets included in the Purchase shall vest
in Buyer, whether or not the conditions precedent to the Purchase were in fact
satisfied; provided, however, that Buyer shall not be deemed to have waived any
claim it may have under this Agreement for the failure by Seller in fact to
satisfy any such condition precedent.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
SECTION 5.1 General Representations and Warranties of Seller. In order
------------------------------------------------
to induce Buyer to enter into this Agreement and to make Purchases hereunder,
Seller hereby makes the following representations and warranties at the times
and to the extent set forth in Section 4.2.
-----------
(a) Organization and Good Standing. Seller is a corporation duly
------------------------------
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has full power and authority to own its
properties and to conduct its business as the properties presently are owned and
the business presently is conducted. Seller had at all relevant times, and now
has, all necessary power, authority and legal right to own, sell and (if
applicable) contribute the Purchased Assets.
8
<PAGE>
(b) Due Qualification. Seller is duly qualified to do business and is in
-----------------
good standing as a foreign corporation (or is exempt from such requirements),
and has obtained all necessary licenses and approvals, in all jurisdiction in
which the ownership or lease of property or the conduct of its business requires
qualifications, licenses or approvals and in which failure to maintain such
qualifications, licenses and approvals would have a material adverse effect on
the Purchased Assets or the ability of Seller to perform its obligations under
this Agreement.
(c) Power and Authority; Due Authorization. Seller has (i) all necessary
--------------------------------------
power and authority to (A) execute and deliver this Agreement and the other
Transaction Documents to which it is a party, (B) perform its obligations under
this Agreement and the other Transaction Documents to which it is a party, and
(C) sell, assign and (if applicable) contribute the Purchased Assets on the
terms and subject to the conditions herein and therein provided and (ii) duly
authorized by all necessary action such sale, assignment and (if applicable)
contribution, the execution, delivery and performance of this Agreement and the
other Transaction Documents to which it is a party an the consummation of the
transactions provided for in this Agreement and the other Transaction Documents
to which it is a party.
(d) Valid Sale; Binding Obligations. Each sale of Purchased Assets made by
-------------------------------
Seller pursuant to this Agreement, and (if applicable) each contribution of
Purchased Assets made to Buyer shall constitute a valid sale, transfer and
assignment of all of Seller's right, title and interest in, to and under such
Purchased Assets, free and clear of any Adverse Claim (other than any Permitted
Adverse Claim). This Agreement constitutes, and each other Transaction Document
to which Seller is a party when duly executed and delivered will constitute, a
legal, valid and binding obligation of Seller, enforceable against it in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization or other similar law as affecting the
enforcement of creditors' rights generally and by general principles of equity,
regardless of whether enforceability is considered in a proceeding in equity or
at law.
(e) No Conflict or Violation. The execution, delivery and performance of,
------------------------
and the consummation of the transactions contemplated by, this Agreement and the
other Transaction Documents to be signed by Seller and the fulfillment of the
terms hereof and thereof will not (i) conflict with, violate, result in any
breach of any of the terms and provisions of, or constitute (with or without
notice or lapse of time of both) a default under, (A) its articles of
incorporation, bylaws, certificate of organization or operating agreement, as
applicable, or (B) any indenture, loan agreement, mortgage, deed of trust or
other agreement or instrument to which Seller is a party or by which it or any
of its properties is bound, (ii) result in the creation or imposition of any
Adverse Claim upon any of the Purchased Assets pursuant to the terms of any such
indenture, loan agreement, mortgage, deed of trust or other agreement or
instrument, other than pursuant to this Agreement and the other Transaction
Documents, or (iii) conflict with or violate any federal, state, local or
foreign law or any decision, decree, order, rule or regulation applicable to it
or any of its properties of any court or of any federal, state, local or foreign
regulatory body, administrative agency or other governmental instrumentality
having jurisdiction over it or any of its properties.
(f) Litigation and Other Proceedings. Except as described in Schedule
-------------------------------- --------
5.1(f), (i) there is no action, suit, proceeding or investigation pending
- ------
against Seller or, to the best knowledge of Seller, threatened, against Seller
before any court, regulatory body, arbitrator, administrative agency or other
9
<PAGE>
tribunal or governmental instrumentality and (ii) it is not subject to any
order, judgment, decree, injunction, stipulation or consent order of or with any
court or other government authority that, in the case of each of clauses (i) and
-----------
(ii), (A) asserts the invalidity of this Agreement or any other Transaction
- ----
Document, (B) seeks to prevent the sale, assignment or contribution of any
Purchased Assets by Seller to Buyer, the issuance of any Seller Assignment
Certificate or the consummation of any of the transactions contemplated by this
Agreement or any other Transaction Document, (C) seeks any determination or
ruling that would materially and adversely affect the performance by Seller of
its obligations under this Agreement or any other Transaction Document, (D)
seeks to affect adversely the income tax attributes of the purchases hereunder
or Seller Assignment Certificate, in the case of each of the foregoing whether
under the United States Federal income tax system or any state income tax
system, or (E) individually or in the aggregate for all such actions, suits,
proceedings and investigations has or would have a reasonable likelihood of
having a Material Adverse Effect with respect to Seller or Buyer.
(g) Third Party Approvals. Except for the filing of the Public Notices and
---------------------
documents referred to in Section 1.7, all authorizations, consents, orders and
-----------
approvals of, or other action by, any Governmental Authority or other third
party that are required to be obtained by Seller, and all notices to and filings
with any Governmental Authority or other third party that are required to be
made by it, in the case of each of the foregoing in connection with the
conveyance of Purchased Assets or the due execution, delivery and performance by
Seller of this Agreement, any Seller Assignment Certificate or any other
Transaction Document to which it is a party and the consummation of the
transactions contemplated by this Agreement and the other Transaction Documents,
have been obtained or made and are in full force and effect, except where the
failure to obtain or make any such authorization, consent, order, approval,
notice or filing, individually or in the aggregate for all such failures, does
not have, and would not have a reasonable likelihood of having, a Material
Adverse Effect with respect to Seller or Buyer. All Public Notices and
documents described under Section 1.7 will have been obtained as required.
-----------
(h) Bulk Sales Act. No transaction contemplated by this Agreement or any
--------------
other Transaction Document requires compliance with, or will be subject to
avoidance under, any bulk sales act or similar law.
(i) Financial Condition. The consolidated balance sheet of Guarantor as at
-------------------
the end of Guarantor's most recent fiscal year and the related consolidated
statements of earnings, stockholders' equity and cash flows of Guarantor for
such fiscal year (such balance sheet and related statements being audited) and
the unaudited consolidated balance sheet of Guarantor and its consolidated group
as at the end of Seller's most recent fiscal quarter and the related statements
of earnings, stockholders' equity and cash flows of Guarantor and its
consolidated group for such fiscal quarter, copies of which have been furnished
to Buyer, Trustee and each Required Person, fairly present the consolidated
financial position and business of Guarantor as at the dates specified therein
and the consolidated results of the operations of Guarantor and its consolidated
group for the periods ended on such dates, all in accordance with GAAP
consistently applied throughout the periods reflected therein, and, since the
end of Guarantor's most recent fiscal year through the date hereof there has
been no material adverse change in the condition (financial or otherwise),
business or operations of Guarantor and its consolidated group.
10
<PAGE>
(j) Margin Regulations. No use of any funds obtained by Seller under this
------------------
Agreement will conflict with or contravene any of Regulations G, T, U and X
promulgated by the Federal Reserve Board from time to time.
(k) Quality of Title.
----------------
(i) Immediately before each purchase to be made by Buyer hereunder,
each Purchased Asset of Seller that is then to be transferred to Buyer
hereunder shall be owned by Seller free and clear of any Adverse Claim
(other than any Permitted Adverse Claim or any Adverse Claim arising solely
as the result of any action taken by Buyer hereunder or by Trustee under
the Pooling Agreement); provided that the existence of an Adverse Claim
that is released on the Closing Date (upon application of the proceeds of
the issuance of Certificates on that date) shall not constitute a breach of
this representation and warranty; and Seller shall have made or effected
all Public Notices and shall have taken all other action under applicable
law in each relevant jurisdiction in order to protect and perfect the
ownership or security interest of Buyer and its successors in the Purchased
Assets against all creditors of, and purchasers from, Seller.
(ii) No effective Public Notice that covers all or part of any
Receivable originated by Seller, any interest therein or any Related Asset
with respect thereto is on file in any recording office except such as may
be filed (A) in favor of Seller in accordance with the Obligor Loan
Agreements (B) in favor of Buyer pursuant to this Agreement and (C) in
favor of Trustee, for the benefit of the Investor Certificateholders, in
accordance with the Pooling Agreement.
(iii) Seller is and, after consummation of the transactions
contemplated herein, will be Solvent.
(iv) Each Purchase by Buyer from Seller constitutes a true and
valid sale of the Purchased Assets under applicable state law and true and
valid assignments and transfers for consideration (and not merely a pledge
of the Purchased Assets for security purposes), enforceable against the
creditors of Seller, and no Purchased Assets transferred to Buyer hereunder
shall constitute property of Seller.
(l) Eligible Receivables. On the date of each Purchase of Receivables
--------------------
hereunder from Seller, such Receivables are Eligible Receivables.
(m) Accuracy of Information. All written information furnished by or on
-----------------------
behalf of Seller to Buyer, Trustee or any Investor Certificateholder pursuant to
or in connection with any Transaction Document or any transaction contemplated
herein or therein shall not contain any untrue statement of a material fact or
omit to state material facts necessary to make the statements made therein not
misleading, in each case in the light of the circumstances under which the
statements were made or the information was furnished, or any of such
information has been corrected in writing by Seller delivered to Buyer, Trustee
or the Investor Certificateholder, as applicable, sufficiently prior to the date
such information becomes material as to eliminate the effect of any prior
inaccuracy or omission.
11
<PAGE>
(n) Offices. The principal place of business and chief executive office of
-------
Seller is located at the address set forth under Seller's signature hereto, and
any other location which has been Seller's principal place of business or chief
executive office during the past four months or in which Seller keeps (or has
kept during the past four months) all Records, invoices, purchase orders and
agreements related to the Purchased Assets (and all original documents relating
thereto) is specified in Schedule 5.1(n) (or at such other locations, notified
---------------
to Trustee and each Required Person in accordance with Section 6.1(f), in
--------------
jurisdictions where all action required pursuant to Section 7.3 has been taken
-----------
and completed).
(o) Payment Instructions. Seller has instructed all Obligors with respect
--------------------
to Receivables that have been transferred to Buyer to submit all payments on the
Purchased Assets directly to the Master Collection Account. Any payments on
Purchased Assets received by the Seller will be deposited with the Trustee
within two Business Days of receipt for credit in the Master Collection Account.
(p) Compliance with Applicable Laws. Seller is in compliance in all
-------------------------------
material respects with the requirements of all applicable laws, rules,
regulations and orders of all Governmental Authorities (federal, state, local or
foreign, and including consumer protection and environmental laws) to the extent
the failure to comply, individually or in the aggregate for all such failures,
has, or has a reasonable likelihood of having, a Material Adverse Effect with
respect to Seller or Buyer.
(q) Legal Names. Except as set forth in Schedule 5.1(q), since January 1,
----------- ---------------
1992 Seller has not been known by any legal name other than HCFP Funding II,
L.P. or its corporate name as of the date hereof, except to the extent permitted
otherwise pursuant to Section 6.3(e), nor has Seller been the subject of any
--------------
merger, consolidation, amalgamation or other corporate reorganization since
January 1, 1992 that resulted in a change of name, identity or corporate
structure. Seller uses no trade names other than its actual corporate name and
the trade names set forth in Schedule 5.1(q).
---------------
(r) Investment Company Act. Seller is not, and is not controlled by, any
----------------------
"investment company" registered or required to be registered under the
Investment Company Act of 1940, as amended.
(s) Taxes. Seller has filed or caused to be filed all tax returns (foreign
-----
or domestic, federal, province, territory, state or local) and reports required
by law to have been filed by it (except such returns the non-filing of which do
not have, and do not present a reasonable likelihood of having, a Material
Adverse Effect with respect to Seller or Buyer) and has paid all taxes,
assessments and governmental charges which are due and payable by it, except any
such taxes, assessments or charges (i) that are being diligently contested in
good faith by appropriate proceedings, (ii) for which adequate reserves in
accordance with GAAP have been set aside on its books, and (iii) with respect to
which no Adverse Claim, except Permitted Adverse Claims, has been imposed upon
any Purchased Assets .
(t) Proprietary Software Programs. Each proprietary software program, and
-----------------------------
any license or other agreement relating to such program, used in the origination
or servicing of Purchased Assets is described in Schedule 5.1(t) and has been
---------------
provided to the Trustee.
12
<PAGE>
(u) Non-Seller Originated Receivables. To the extent Seller did not
---------------------------------
originate any of the Purchased Assets, such Purchased Assets were acquired by
Seller from loan originators pursuant to duly executed, valid, binding and
enforceable purchase agreements, except as enforceability may be limited by
bankruptcy, insolvency, reorganization or other similar law as affecting the
enforcement of creditors' rights generally and by general principles of equity,
regardless of whether enforceability is considered in a proceeding in equity or
at law. Neither Seller nor, to Seller's Knowledge, the applicable seller under
such loan sale agreements is in default under any such agreement. Seller has
delivered to Buyer and Trustee a true, correct and complete copy of each such
loan agreement.
SECTION 5.2 Representations and Warranties of Buyer. From the date hereof
---------------------------------------
until the Purchase Termination Date, Buyer hereby represents and warrants that
(a) this Agreement (i) has been duly authorized, executed and delivered by Buyer
and (ii) constitutes the legal, valid and binding obligation of Buyer,
enforceable against it in accordance with its terms, except as enforceability
may be limited by bankruptcy, insolvency, reorganization or other similar laws
affecting the enforcement of creditors' rights generally and by general
principles of equity, regardless of whether enforceability is considered in a
proceeding in equity or at law, and (b) the execution, delivery and performance
of this Agreement does not violate any applicable law or any agreement to which
Buyer is a party or by which its properties are bound.
ARTICLE VI
GENERAL COVENANTS OF SELLER
SECTION 6.1 Affirmative Covenants. From the Closing Date until the first
---------------------
day following the Purchase Termination Date on which all Obligations of Seller
shall have been finally and fully paid and performed and the Invested Amount for
each Series shall have been reduced to zero, unless Buyer shall otherwise give
its prior written consent, Seller hereby agrees that it will perform the
covenants and agreements set forth in this Section 6.1.
(a) Compliance with Laws. Seller will comply in all material respects with
--------------------
all applicable laws, rules, regulations, judgments, decrees and others
(including those relating to the Purchased Assets and the related Obligor Loan
Agreements and any other agreements related thereto), in each case to the extent
the failure to comply, individually or in the aggregate for all such failures,
has, or has a reasonable likelihood of having, a Material Adverse Effect with
respect to Seller or Buyer.
(b) Preservation of Corporate Existence. Seller will preserve and maintain
-----------------------------------
its corporate existence, rights, franchises and privileges in the jurisdiction
of its incorporation, and qualify and remain qualified in good standing as a
foreign corporation in each jurisdiction where the failure to preserve and
maintain such existence, rights, franchises, privileges and qualifications has,
or has a reasonable likelihood of having, a Material Adverse Effect with respect
to Seller or Buyer.
(c) Receivables Reviews. Seller shall, during regular business hours,
-------------------
permit Buyer, Trustee, the Investor Certificateholders and their respective
agents or representatives, at the expense of Seller, (i) to examine and make
copies of and abstracts from, and to conduct accounting reviews of, all Records
in the possession or under the control of Seller relating to the Purchased
Assets, and (ii) to visit the offices of Seller for the purpose of examining the
materials described in clause (i) above, and to discuss matters relating to any
----------
13
<PAGE>
Purchased Assets or Seller's performance hereunder with any of the Authorized
Officers of Seller or, with the prior consent of an Authorized Officer of
Seller, with employees of Seller having knowledge of such matters (the
examinations set forth in the foregoing clauses (i) and (ii) being herein called
----------- ----
a "Seller Receivables Review"). Each Seller Receivables Review shall require
not less than three Business Days' prior notice to Seller, unless Seller is in
default in any material respect under any Transaction Document, in which event
only one Business Days' prior notice shall be required. Buyer, Trustee, and the
Required Persons shall each be entitled to conduct Seller Receivables Reviews
whenever such Person deems it appropriate.
(d) Keeping of Records and Books of Account. Seller shall maintain and
---------------------------------------
implement administrative and operating procedures (including an ability to re-
create records evidencing its Purchased Assets in the event of the destruction
of the originals thereof), and shall keep and maintain all documents, books,
records and other information that are necessary or advisable in accordance with
prudent industry practice and custom for transactions of this type for the
collection and conveyance of all Purchased Assets, and such other records and
information as may be reasonably requested by Buyer, Servicer, Trustee or the
Required Persons. Upon the reasonable request of Buyer made at any time after
the occurrence and continuance of a Servicer Default, Seller will deliver copies
of all books and records maintained pursuant to this subsection to Trustee.
Seller shall maintain at all times accurate and complete books, records and
accounts relating to the Purchased Assets and all Collections thereon received
by Seller in which timely entries shall be made. Such books and records shall
be marked to indicate the sales of all Purchased Assets hereunder and shall
include all payments received and all credits and extensions granted with
respect to the Purchased Receivables.
(e) Performance and Compliance with Obligor Loan Agreements. Seller will,
-------------------------------------------------------
at its expense, timely and fully perform and comply with all provisions,
covenants and other promises required to be observed by it under the Obligor
Loan Agreements related to the Purchased Assets, in each case to the extent
failure to perform or comply has, or has a reasonable likelihood of having, a
Material Adverse Effect with respect to Seller or Buyer.
(f) Location of Records and Offices. Seller will keep its principal place
-------------------------------
of business and chief executive office, and the offices where it keeps all
Records related to the Purchased Assets (and all original documents relating
thereto), at the addresses referred to in Schedule 5.1(n) or, upon not less than
---------------
30 days' prior written notice given by Seller to Buyer, Trustee, Servicer and
each Required Person at such other locations in jurisdictions where all action
required by Section 7.3 shall have been taken and completed.
-----------
(g) Credit and Collection Policy. Seller shall adhere to its Seller's
----------------------------
Credit and Collection Policy in all material respects unless Buyer provides it
written consent to do otherwise.
(h) Separate Existence of Buyer. Seller hereby acknowledges that Trustee,
---------------------------
on behalf of the Trust, is entering into the transactions contemplated by the
Transaction Documents in reliance upon Buyer's identity as a legal entity
separate from Seller and the other Related Persons. Therefore, from and after
the date hereof until the first day following the Purchase Termination Date on
which all Obligations shall have been fully paid and performed and the Invested
Amount for each Series shall have been reduced to zero, Seller will, and will
cause each other Related Person to, take all reasonable steps to continue their
14
<PAGE>
respective identities as separate legal entities and to make it apparent to
third Persons that each is an entity with assets and liabilities distinct from
those of Buyer and that Buyer is not a division of Seller or any other Person.
Without limiting the foregoing, Seller will operate and conduct its business and
otherwise act in a manner which is consistent with the factual assumptions in
each Bankruptcy Opinion, if any, for each Series, but will not be required to
produce nonconsolidated audited financial statements of the Seller.
(i) Payment Instructions to Obligors. Seller will instruct all Obligors
--------------------------------
that all payments in respect of the Purchased Assets shall be submitted directly
to the Master Collection Account and that all subsequent payment instructions
must come from Trustee.
(j) Segregation of Collections. Seller shall use its best efforts to
--------------------------
minimize the deposit of any funds other than Collections into the Master
Collection Account and, to the extent that any such funds nevertheless are
deposited into the Master Collection Account, shall promptly identify any such
funds, or shall cause the funds to be so identified, to Buyer, Servicer, Trustee
and each Required Person (following which notice, Buyer shall use its best
efforts to cause Servicer to return all such funds to Seller).
(k) Identification of Eligible Receivables. Seller will establish and
--------------------------------------
maintain such procedures as are necessary for determining no less frequently
than each Business Day whether each Receivable qualifies as an Eligible
Receivable.
(l) Accuracy of Information. All written information furnished on and
-----------------------
after the Closing Date by or on behalf of Seller to Buyer, Trustee or any
Investor Certificateholder pursuant to or in connection with any Transaction
Document or any transaction contemplated herein or therein shall not contain any
untrue statement of a material fact or omit to state material facts necessary to
make the statements made not misleading, in each case on the date the statement
was made and in light of the circumstances under which the statements were made
or the information was furnished.
(m) Taxes. Seller shall file or cause to be filed, and cause each Person
-----
with whom it shares consolidated tax liability (other than Buyer) to file, all
Federal, state and local tax returns (foreign or domestic, federal, state,
province, territory or local) and reports required by law to have been filed by
it (except where the failure to file such returns or reports does not have, and
has no reasonable likelihood of having, a Material Adverse Effect with respect
to Seller or Buyer) and pay or cause to be paid all taxes, assessments and
governmental charges which are due and payable by it (including any obligation,
as agent or otherwise, to pay or remit any goods and services tax) except any
such taxes or assessments the validity of which are being contested in good
faith by appropriate proceedings and with respect to which Seller shall have set
aside adequate reserves on its books in accordance with GAAP and which
proceedings do not have, and have no reasonable likelihood of having, a Material
Adverse Effect with respect to Seller or Buyer.
(n) Proprietary Software Licenses. Seller shall cause all proprietary
-----------------------------
software licenses or similar agreements used by Seller in the origination or
servicing of Receivables to expressly permit use by Servicer and any Successor
Servicer of the materials subject to such licenses or agreements.
15
<PAGE>
(o) Monitoring of Internal Policies. Seller shall maintain and actively
-------------------------------
monitor its performance of the following procedures and policies: (i) its
Underwriting Guidelines, (ii) collections, (ii) quality control, (iv) accounting
and financial reporting, (v) risk management and insurance, (vi) licensing,
(vii) employee, (viii) management information systems, (ix) disaster recovery,
and (x) such other procedures and policies as may reasonably be requested by
Buyer, Trustee or the Required Person from time to time. Seller shall not alter
such procedures and policies except for reasonable cause.
(p) Net Worth. From and after the termination of the Guarantee in
---------
accordance with Section 1.3 thereof, Seller shall maintain aggregate
stockholders' equity, computed in accordance with GAAP, of at least $20,000,000
(such stockholders' equity to be determined without consolidation of the assets
of Guarantor).
SECTION 6.2 Reporting Requirements. From the Closing Date until the first
----------------------
day following the Purchase Termination Date on which all Obligations of Seller
shall have been finally and fully paid and performed and the Invested Amount for
each Series shall have been reduced to zero, Seller agrees that it will, unless
Buyer and Trustee shall otherwise give prior written consent, furnish to Buyer,
Trustee and each Required Person:
(a) Quarterly Financial Statements. Within 45 days after the end of each
------------------------------
of the first three fiscal quarters of each fiscal year of Guarantor, copies of
the unaudited consolidated balance sheets of Guarantor and its consolidated
group as at the end of the fiscal quarter and the related unaudited statements
of earnings and cash flows, in each case for the fiscal quarter and for the
period from the beginning of the fiscal year through the end of such fiscal
quarter, prepared in accordance with GAAP consistently applied throughout the
periods reflected therein and certified (subject to year end adjustments and the
omission of footnotes) by the chief financial officer or chief accounting
officer of the parent company of the group that includes Guarantor; provided,
--------
however that upon termination of the Guarantee, for purposes of
- -------
this paragraph, "Seller" shall replace "Guarantor," and Seller's financial
statements delivered pursuant to this paragraph shall not be prepared on a
consolidated basis with Guarantor.
(b) Annual Financial Statements. As soon as possible and in any event
---------------------------
within 90 days after the end of each fiscal year of Guarantor, a copy of the
audited consolidated balance sheet of Guarantor and its consolidated
Subsidiaries as at the end of the fiscal year and the related statements of
earnings, stockholders' equity and cash flows of Guarantor and its consolidated
group for the fiscal year, setting forth in each case in comparative form the
corresponding figures for the preceding fiscal year and prepared in accordance
with GAAP consistently applied throughout the periods reflected therein,
certified, without Impermissible Qualification, by any "big six" accounting firm
(or such other independent certified public accountants of nationally recognized
standing in the United States of America as shall be selected by Seller and
approved by the Required Persons); provided, however that upon termination of
-------- -------
the Guarantee, for purposes of this paragraph, "Seller" shall replace
"Guarantor," and Seller's financial statements delivered pursuant to this
paragraph shall not be prepared on a consolidated basis with Guarantor.
(c) Early Amortization Events. As soon as possible, and in any event
-------------------------
within two Business Days after any officer of Seller has obtained actual
knowledge of the occurrence of any Early Amortization Event or Unmatured Early
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Amortization Event, in each case specifically relating to Seller, a written
statement of an Authorized Officer of Seller describing the event and the action
that Seller proposes to take with respect thereto, in each case in reasonable
detail,
(d) Material Adverse Effect. As soon as possible and in any event within
-----------------------
two Business Days after any officer of Seller has actual knowledge thereof,
written notice that describes in reasonable detail any event or occurrence that,
individually or in the aggregate for all such events or occurrences, has had, or
has a reasonably likelihood of having, a Material Adverse Effect with respect to
Seller or Buyer,
(e) Proceedings. As soon as possible and in any event within two Business
-----------
Days after any officer of Seller has actual knowledge thereof, written notice of
(i) any litigation, investigation or proceeding of the type described in Section
-------
5.1(f) not previously disclosed to Buyer and (ii) any judgment, settlement or
- ------
other final disposition with respect to any such previously disclosed
litigation, investigation or proceeding,
(f) Defaults. As soon as possible and in any event within two Business
--------
Days after any officer of Seller has actual knowledge thereof, written notice of
any material default under any Obligor Loan Agreement, and
(g) Other. Promptly, from time to time, (i) such other information,
-----
documents, records or reports respecting the Purchased Assets or (ii) such other
publicly available information respecting the condition or operations, financial
or otherwise, of Seller, in each case as Buyer may from time to time reasonably
request in order to protect the interests of Buyer, Trustee or the Investor
Certificateholders under or as contemplated by this Agreement.
SECTION 6.3 Negative Covenants. From the Closing Date until the first day
------------------
following the Purchase Termination Date on which all Obligations of Seller shall
have been finally and fully paid and performed and the Invested Amount for each
Series shall have been reduced to zero, unless Buyer and Trustee shall otherwise
give prior written consent, Seller hereby agrees that it will perform the
covenants and agreements set forth in this section.
(a) Sales, Liens. Except as otherwise provided herein or in the Pooling
------------
Agreement, Seller will not (i)(A) sell, assign (by operation of law or
otherwise) or otherwise transfer to any Person, (B) pledge any interest in, (C)
grant, create, incur, assume or permit to exist any Adverse Claim (other than
Permitted Adverse Claims) to or in favor of any Person upon or with respect to,
or (D) cause to be filed any Public Notice relating to perfection with respect
to, any Purchased Asset or upon or with respect to any account to which any
Collections of any such Purchased Asset are sent or any interest therein, or
(ii) assign to any Person any right to receive income from or in respect of any
of the foregoing.
In the event that Seller fails to keep any Purchased Assets free and
clear of any Adverse Claim (other than a Permitted Adverse Claim, any Adverse
Claims arising hereunder, Adverse Claims created by Buyer or Trustee without any
action of Seller, and other Adverse Claims permitted by any other Transaction
Document), Buyer may upon providing notice of such Adverse Claim to Seller
(without limiting its other rights with respect to Seller's breach of its
17
<PAGE>
obligations hereunder) make reasonable expenditures necessary to release the
Adverse Claim. Buyer shall be entitled to indemnification for any such
expenditures pursuant to the indemnification provisions of Article IX.
----------
Alternatively, Buyer may deduct such expenditures as an offset to the Purchase
Price owed to Seller hereunder.
Seller will not (i) transfer, or (ii) pledge or grant any security
interest in its ownership interest in Buyer.
(b) Extension or Amendment of Receivables; Change in Credit and Collection
----------------------------------------------------------------------
Policy or Obligor Loan Agreements. Seller will not, (i) extend, amend or
- ---------------------------------
otherwise modify the terms of any Obligor Loan Agreement or (ii) change the
terms and provisions of the Credit and Collections Policy in a manner in either
case that has, or has a reasonable likelihood of having, a Material Adverse
Effect with respect to Seller or Buyer, unless in each case the change is made
with the prior written approval of Buyer and the Required Persons.
(c) Mergers, Acquisitions, Sales, etc. Except for (i) the Permitted Sale,
----------------------------------
(ii) mergers or consolidations in which Seller is the surviving Person, (ii)
mergers or consolidations of a direct or indirect Subsidiary of Guarantor (other
than Buyer) into Seller or (iii) mergers or consolidations in which the
surviving Person expressly assumes the performance of this Agreement, Seller
will not be a constituent to any merger or consolidation. Seller will give
Trustee and each Required Person written notice of any such permitted merger or
consolidation promptly following completion thereof. Seller will not, directly
or indirectly, transfer, assign, convey or lease, whether in one transaction or
in a series of transactions, all or substantially all of its assets or sell or
assign, with or without recourse, any Purchased Assets other than pursuant to
this Agreement. Seller will not, directly or indirectly, transfer, assign,
convey or pledge any interest in Buyer.
(d) Change in Name. Seller will not (i) change its corporate name or (ii)
--------------
change the name under or by which it does business in any manner that would or
may make any Public Notice filed by Seller in accordance herewith seriously
misleading within the meaning of Section 9-402(7) of an applicable enactment of
the UCC, in each case unless Seller shall have given Buyer, Servicer, Trustee,
and each Required Person 30 days' prior written notice thereof and unless, prior
to any change in name, Seller shall have taken and completed all action required
by Section 7.3.
-----------
(e) Certificate of Formation. Seller will not cause or give its consent to
------------------------
Buyer to amend Buyer's articles of incorporation or bylaws, as applicable,
without providing (i) prior notice to the Required Persons and (ii) the prior
written consent of the Required Persons if such amendment would have a Material
Adverse Effect on the Trust, Servicer, Transferor or Required Persons in the
sole discretion of such Required Persons.
ARTICLE VII
ADDITIONAL RIGHTS AND OBLIGATIONS IN
RESPECT OF THE PURCHASED ASSETS
SECTION 7.1 Rights of Buyer.
---------------
18
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(a) Seller hereby authorizes Buyer and/or its designees to take any and all
steps in Seller's name and on behalf of Seller that Buyer and/or its designees
determine are reasonably necessary or appropriate to collect all amounts due
under any and all Purchased Assets, including endorsing the name of Seller on
checks and other instruments representing Collections and enforcing Seller's
rights under such Purchased Assets and the Obligor Loan Agreements. Trustee may
exercise any of the foregoing rights in the place of Buyer (as assignee or
otherwise) at any time.
(b) Buyer shall have no obligation to account for any Purchased Asset to
Seller. Buyer shall have no obligation to account for, or to return
Collections, or any interest or other finance charge collected pursuant thereto,
to Seller, irrespective of whether such Collections and charges are in excess of
the Purchase Price for the Purchased Assets.
(c) Buyer shall have the unrestricted right to further assign, transfer,
deliver, hypothecate, subdivide or otherwise deal with the Purchased Assets, and
all of Buyer's right, title and interest in, to and under this Agreement, on
whatever terms Buyer shall determine, pursuant to the Pooling Agreement or
otherwise.
(d) Buyer shall have the sole right to retain any gains or profits created
by buying, selling or holding the Purchased Assets and shall have the sole risk
of and responsibility for losses or damages created by such buying, selling or
holding.
SECTION 7.2 Responsibilities of Seller. Anything herein to the contrary
--------------------------
notwithstanding, Seller hereby agrees:
(a) to deliver directly to the Master Collection Account (for Buyer's
account), within two Business Days after receipt thereof, any Collections that
it receives, in the form so received, and agrees that all such Collections shall
be deemed to be received in trust for Buyer and shall be maintained and
segregated separate and apart from all other funds and moneys of Seller until
delivery of such Collections to the Master Collection Account,
(b) to perform all of its obligations hereunder and under the Obligor Loan
Agreements at least to the same extent as if the Purchased Assets had not been
sold hereunder, and the exercise by Buyer or its designee or assignee of Buyer's
rights hereunder or in connection herewith shall not relieve Seller from any of
its obligations under the Obligor Loan Agreements or Purchased Assets,
(c) that it hereby grants to Buyer an irrevocable power of attorney, with
full power of substitution, coupled with an interest, to take in the name of
Seller all steps necessary or advisable to endorse, negotiate or otherwise
realize on any writing or other right of any kind held or transmitted by Seller
or transmitted or received by Buyer (whether or not from Seller) in connection
with any Purchased Asset, and
(d) to the extent that Seller does not own the computer software that
Seller uses to account for Receivables, Seller shall provide Buyer, Servicer and
Trustee with such licenses, sublicenses and/or assignments of contracts as
Buyer, Servicer or Trustee shall require with regard to all services and
computer hardware or software used by Seller that relate to the servicing of the
Purchased Assets.
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SECTION 7.3 Further Action Evidencing Purchases. Seller agrees that from
-----------------------------------
time to time, at its expense, it will promptly, upon reasonable request by
Buyer, Servicer or Trustee, execute and deliver all further instruments and
documents, and take all further action, in order to perfect, protect or more
fully evidence the Purchase by Buyer of the Purchased Assets under this
Agreement, or to enable Buyer to exercise or enforce any of its rights under any
Transaction Document. Seller agrees that from time to time, at its expense, it
will promptly, upon request, take all action that Buyer, Servicer or Trustee may
reasonably request in order to perfect, protect or more fully evidence the
Purchase or contribution of the Purchased Assets or to enable Buyer or Trustee
(as the assignee of Buyer) to exercise or enforce any of its rights hereunder or
under any other Transaction Document.
If (i) Seller fails to perform any of its agreements or obligations under
this Agreement and does not remedy the failure within the applicable cure
period, if any, and (ii) Buyer in good faith reasonably believes that the
performance of such agreements and obligations is necessary or appropriate to
protect its interests under this Agreement, then Buyer or its designee may (but
shall not be required to) perform, or cause performance of, such agreement or
obligation and the reasonable expenses of Buyer or its designee or assignee
incurred in connection with such performance shall be payable by Seller as
provided in Section 9.1.
-----------
ARTICLE VIII
[RESERVED]
ARTICLE IX
INDEMNIFICATION AND REPURCHASE OBLIGATIONS
SECTION 9.1 Indemnities by Seller. Without limiting any other rights that
---------------------
any Seller Indemnified Party (as defined below) may have hereunder or under
applicable law, Seller agrees to indemnify Buyer, each of its successors,
permitted transferees and assigns (including Trustee), each Investor
Certificateholder, each Successor Servicer, and all officers, directors,
shareholders, controlling Persons, employees and agents of any of the foregoing
(each of the foregoing Persons being individually called a "Seller Indemnified
Party"), forthwith on demand, from and against any and all damages, losses,
claims (whether on account of settlements or otherwise), judgments, liabilities
and related reasonable costs and expenses (including reasonable attorneys' fees
and disbursements) awarded against or incurred by any of them arising out of, in
connection with, or as a result of any of the following (all of the foregoing
being collectively called "Seller Indemnified Losses"):
(a) any representation or warranty by Seller (or any of its Authorized
Officers) under any of the Transaction Documents, any Purchase Report or any
other information or report delivered by or on behalf of Seller with respect to
Seller or the Purchased Assets (including without limitation any representation,
warranty, information or report relied upon by Buyer in connection with the
offering or sale of any Certificate), that contained any untrue statement of a
20
<PAGE>
material fact or omitted to state a material fact necessary to make the
statements, in the light of the circumstances under which they were made, not
misleading,
(b) the failure by Seller to comply with any applicable law, rule or
regulation with respect to any Purchased Asset or to comply with any Obligor
Loan Agreement related thereto, or the nonconformity of any Purchased Asset or
Obligor Loan Agreement with any such applicable law, rule or regulation,
(c) the failure to vest and maintain vested in Buyer ownership of or a
first priority perfected security interest in, the Purchased Assets, free and
clear of any Adverse Claim (other than an Adverse Claim created in favor of
Buyer or its Assignee pursuant to this Agreement or in favor of Trustee pursuant
to the Pooling Agreement), whether existing at the time of the sale of such
Purchased Asset or at any time thereafter and without regard to whether such
Adverse Claim was a Permitted Adverse Claim,
(d) any failure of Seller to perform its duties or obligations in
accordance with the provisions of the Transaction Documents,
(e) any products liability claim, personal injury or property damage suit,
environmental liability claim or any other claim or action by a party other than
Buyer of whatever sort, whether sounding in tort, contract or any other legal
theory, arising out of or in connection with the Purchased Assets with respect
thereto,
(f) the failure to file, or any delay in filing, any Public Notice with
respect to any Purchased Assets, whether at the time of any sale or at any
subsequent time,
(g) any dispute, claim, offset or defense of an Obligor to the payment of a
Purchased Asset (i) that has accrued on or before the date such Purchased Asset
is sold to Buyer, including a defense based on such Purchased Asset not being a
legal, valid and binding obligation of the Obligor enforceable against it in
accordance with its terms, or (ii) that arises from the circumstances described
in 9.1(b) herein,
(h) any tax or governmental fee or charge (other than franchise taxes and
taxes on or measured by the net income of Buyer or any of its assignees), all
interest and penalties thereon or with respect thereto, and all reasonable out-
of-pocket costs and expenses, including the reasonable fees and expenses of
counsel in defending against the same, that may arise by reason of the
conveyance of the Receivables originated by Seller or any Related Asset
connected with any such Receivables, and
(i) Buyer's actual costs for any breakage amounts due Investor
Certificateholders as a consequence of Seller failing to deliver the specified
amount of Eligible Receivables on any Subsequent Closing Date after Seller's
giving notice of a pending purchase pursuant to Section 1.2(b) herein.
With respect to a breach of any representation or warranty that a specified
Purchased Receivable is an Eligible Receivable or any other claim for
indemnification under Section 9.1 with respect to a specified Purchased
-----------
21
<PAGE>
Receivable, Seller shall, within five (5) Business Days of obtaining knowledge
of such breach and with the approval of Buyer which approval shall not be
unreasonably withheld, repurchase such Purchased Receivable by (i) depositing
the Repurchase Price therefor, less any amounts already received by Buyer
thereon, in the Master Collection Account payable fully in immediately available
funds, or (ii) exchanging such Purchased Receivable for one or more Eligible
Receivables having an aggregate Unpaid Balance at least equalling the Repurchase
Price for the Purchased Receivable and having approximately the same weighted
average maturity as the Purchased Receivable.
Notwithstanding the foregoing (and with respect to clause (ii) below, without
-----------
prejudice to the rights that Buyer may have pursuant to the other provisions of
this Agreement or the provisions of any of the other Transaction Documents), in
no event shall any Seller Indemnified Party be indemnified for any Seller
Indemnified Losses (i) resulting from gross negligence or willful misconduct on
the part of the Seller Indemnified Party, (ii) to the extent the same includes
losses in respect of Receivables and reimbursement therefor that would
constitute credit recourse to Seller for the amount of any Purchased Asset fully
enforceable against but not paid by the related Obligor, (iii) to the extent the
same are or result from lost profits (other than any breakage amounts owed by
Buyer to any Investor Certificateholder) or other consequential damages, or (iv)
to the extent the same are or result from taxes on or measured by the net income
of the Seller Indemnified Party.
If for any reason the indemnification provided above in this section is
unavailable to a Seller Indemnified Party or is insufficient to hold a Seller
Indemnified Party harmless, then Seller shall contribute to the maximum amount
payable or paid to the Seller Indemnified Party as a result of the loss, claim,
damage or liability in such proportion as is appropriate to reflect not only the
relative benefits received by the Seller Indemnified Party on the one hand and
Seller on the other hand, but also the relative fault of the Seller Indemnified
Party (if any) and Seller and any other relevant equitable considerations.
ARTICLE X
MISCELLANEOUS
SECTION 10.1 Amendments; Waivers, Etc.
------------------------
(a) The provisions of this Agreement may from time to time be amended,
modified or waived, if such amendment, modification or waiver is in writing and
signed by Buyer and Seller (with respect to an amendment) or by Buyer (with
respect to a waiver or consent by it) and, in the case of any amendment,
modification or waiver, by Trustee and each Required Person, and then any such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given.
(b) No failure or delay on the part of Buyer, any Seller Indemnified Party,
Trustee or any other third party beneficiary referred to in Section 10.11(a) in
----------------
exercising any power or right hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such power or right preclude any
other or further exercise thereof or the exercise of any other power or right.
No notice to or demand on Seller in any case shall entitle it to any notice or
demand in similar or other circumstances. No waiver or approval by Buyer,
22
<PAGE>
Servicer, Trustee or any Required Person under this Agreement shall, except as
may otherwise be stated in the waiver or approval, be applicable to subsequent
transactions. No waiver or approval under this Agreement shall require any
similar or dissimilar waiver or approval thereafter to be granted hereunder.
SECTION 10.2 Notices, Etc. All notices and other communications
------------
provided for hereunder shall, unless otherwise stated herein, be in writing
(including facsimile communication) and shall be personally delivered or sent by
certified mail, postage prepaid, by facsimile or by overnight courier, to the
intended party at the address or facsimile number of such party set forth under
its name on the signature pages hereof or at such other address or facsimile
number as shall be designated by the party in a written notice to the other
parties hereto given in accordance with this section. Copies of all notices and
other communications provided for hereunder shall be delivered to Servicer,
Trustee, and any Required Person at their respective addresses for notices set
forth in the Pooling Agreement. All notices and communications provided for
hereunder shall be effective, (a) if personally delivered, when received, (b) if
sent by certified mail, four Business Days after having been deposited in the
mail, postage prepaid and properly addressed, (c) if transmitted by facsimile,
when sent, receipt confirmed by telephone or electronic means and (d) if sent by
overnight courier, two Business Days after having been given to the courier
unless sooner received by the addressee.
SECTION 10.3 Cumulative Remedies. The remedies herein provided are
-------------------
cumulative and not exclusive of any remedies provided by law. Without limiting
the foregoing, Seller hereby authorizes Buyer, at any time and from time to
time, to the fullest extent permitted by law, to set-off, against any
Obligations of Seller to Buyer that are then due and payable or that are not
then due and payable from Seller to Buyer but have then accrued, any and all
indebtedness or other obligations at any time owing to Seller by Buyer to or for
the credit or the account of Seller or that are not then due and payable from
Buyer to Seller but have then accrued.
SECTION 10.4 Binding Effect; Assignability; Survival of Provisions. This
-----------------------------------------------------
Agreement shall be binding upon and inure to the benefit of Buyer and Seller and
their respective successors and permitted assigns (including, in the case of the
Buyer, Trustee). Seller may not assign any of its rights hereunder or any
interest herein without the prior written consent of Buyer and Trustee. This
Agreement shall create and constitute the continuing obligations of the parties
hereto in accordance with its terms, and shall remain in full force and effect
until the earliest of (i) the date on which the Trust is terminated pursuant to
Section 12.1 of the Pooling Agreement, (ii) the date on which all Obligations
shall have been finally and fully paid and performed, or (iii) such other time
as the parties hereto shall agree and as to which Trustee (at the direction of
the Required Persons) shall have given its prior written consent. The rights
and remedies with respect to any breach of any representation and warranty made
by Seller pursuant to Article V and the indemnification and payment provisions
---------
of Article IX and Section 10.6 shall be continuing and shall survive any
------------
termination of this Agreement.
SECTION 10.5 Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN
-------------
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 10.6 Costs, Expenses and Taxes. In addition to the obligations of
-------------------------
Seller under Article IX, Seller agrees to pay on demand:
----------
23
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(a) all reasonable out-of-pocket and other costs and expenses in connection
with the enforcement of this Agreement or the Seller Assignment Certificate by
Buyer or any successor in interest to Buyer (including the Trustee and each
Investor Certificateholder), and
(b) all stamp and other taxes and fees payable or determined to be payable
in connection with the execution and delivery, and the filing and recording, of
this Agreement, and agrees to indemnify each Seller Indemnified Party against
any liabilities with respect to or resulting from any delay in paying or
omitting to pay the taxes and fees.
SECTION 10.7 SUBMISSION TO JURISDICTION. EACH PARTY HERETO HEREBY
--------------------------
IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY NEW YORK STATE OR
FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK, NEW
YORK OVER ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT,
AND HEREBY (A) IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF THE ACTION OR
PROCEEDING MAY BE HEARD AND DETERMINED IN THE STATE OR FEDERAL COURT, (B)
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO, THE DEFENSE
OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF THE ACTION OR PROCEEDING.
AS AN ALTERNATIVE METHOD OF SERVICE TO PERSONAL DELIVERY, EACH OF BUYER AND
SELLER ALSO IRREVOCABLY CONSENTS TO THE SERVICE OF ANY AND ALL PROCESS IN ANY
ACTION OR PROCEEDING BY THE MAILING OF COPIES OF THE PROCESS TO BUYER OR SELLER
(AS APPLICABLE) AT ITS ADDRESS SPECIFIED HEREIN. NOTHING IN THIS SECTION SHALL
AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE LEGAL PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW.
SECTION 10.8 WAIVER OF JURY TRIAL. EACH PARTY HERETO WAIVES ANY RIGHT TO
--------------------
A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS
UNDER OR RELATING TO THIS AGREEMENT OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR
AGREEMENT DELIVERED OR THAT MAY IN THE FUTURE BE DELIVERED IN CONNECTION
THEREWITH OR ARISING FROM ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER VERBAL OR WRITTEN), ACTIONS OF EITHER OF THE PARTIES HERETO OR ANY
OTHER RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT, AND AGREES THAT
ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A
JURY.
SECTION 10.9 Integration. This Agreement contains a final and complete
------------
integration of all prior expressions by the parties hereto with respect to the
subject matter hereof and thereof and shall together constitute the entire
agreement between the parties hereto with respect to the subject matter hereof
and thereof, superseding all prior oral or written understandings.
SECTION 10.10 Counterparts. This Agreement may be executed in any number
------------
of counterparts and by different parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
together shall constitute one and the same agreement.
SECTION 10.11 Acknowledgement and Consent.
---------------------------
(a) Seller acknowledges that, contemporaneously herewith, Buyer is selling,
transferring, assigning, setting over and otherwise conveying to the Trust all
of Buyer's right, title and interest in, to and under the Purchased Assets, this
Agreement and all of the other Transaction Documents pursuant to Section 2.1 of
24
<PAGE>
the Pooling Agreement. Seller hereby consents to the sale, transfer, assignment,
set over and conveyance to the Trust by Buyer of all right, title and interest
of Buyer in, to and under the Purchased Assets, this Agreement and the other
Transaction Documents, and all of Buyer's rights, remedies, powers and
privileges, and all claims of Buyer against Seller, under or with respect to
this Agreement and the other Transaction Documents (whether arising pursuant to
the terms of this Agreement or otherwise available at law or in equity),
including (i) the right of Buyer, at any time, to enforce this Agreement against
Seller and the obligations of Seller hereunder, and (ii) the exclusive right at
any time, to give or withhold any and all consents, requests, notices,
directions, approvals, demands, extensions or waivers under or with respect to
this Agreement, or the obligations in respect of Seller thereunder in Buyer's
place and stead. Each of the parties hereto acknowledges and agrees that Trustee
and the Trust are third party beneficiaries of the rights of Buyer arising
hereunder. Seller hereby acknowledges and agrees that it has no claim to or
interest in any of the Transaction Accounts.
(b) Seller hereby agrees to execute all agreements, instruments and
documents, and to take all other action, that Buyer or Trustee reasonably
determines is necessary or appropriate to evidence its consent described in
subsection (a) above. To the extent that Buyer has granted or grants powers of
- --------------
attorney to Trustee or any successor Servicer under the Pooling Agreement,
Seller hereby grants a corresponding power of attorney on the same terms to
Buyer. Seller hereby acknowledges and agrees that Buyer, in all of its
capacities, shall assign to Trustee for the benefit of the Investor
Certificateholders the powers of attorney and other rights and interests granted
by Seller to Buyer hereunder and agrees to cooperate fully with Trustee and
Servicer in the exercise of the rights.
SECTION 10.12 No Partnership or Joint Venture. Nothing contained in this
-------------------------------
Agreement shall be deemed or construed by the parties hereto or by any third
person to create the relationship of principal and agent or of partnership or of
joint venture.
SECTION 10.13 No Proceedings. Seller, and each assignee of Buyer
--------------
(including Trustee), hereby agrees that it will not institute against Buyer or
the Trust, or join any other Person in instituting against Buyer or the Trust,
any insolvency proceeding (such as any proceeding of the type referred to in the
definition of Event of Bankruptcy) so long as any Investor Certificates issued
by the Trust shall be outstanding or there shall not have elapsed one year plus
one day since the last day on which any such Investor Certificates shall have
been outstanding.
SECTION 10.14 Severability of Provisions. If any one or more of the
--------------------------
covenants, agreements, provisions or terms of this Agreement shall for any
reason whatsoever be held invalid, then the unenforceable covenants, agreements,
provisions or terms shall be deemed severable from the remaining covenants,
agreements, provisions or terms of this Agreement and shall in no way affect the
validity or enforceability of the other provisions of this Agreement.
SECTION 10.15 Recourse to Buyer. Except to the extent expressly provided
-----------------
otherwise in this Agreement, the obligations of Buyer under this Agreement are
solely the obligations of Buyer. No recourse shall be had for payment of any
fee payable by or other obligation of or claim against Buyer that arises out of
this Agreement against any director, officer or employee of Buyer. The
provisions of this section shall survive the termination of this Agreement.
25
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Purchase and Sale
Agreement to be executed by their respective officers thereunto duly authorized,
as of the date first above written.
HCFP FUNDING II, INC.,
as Seller
By: /s/ Edward P. Nordberg, Jr.
----------------------------
Its: Executive Vice President
-------------------------
Address: 2 Wisconsin Circle
Suite 320
Chevy Chase, Maryland 20815
Attention: President
Telephone: 301/664-9827
Facsimile: 301-664-9860
WISCONSIN CIRCLE II FUNDING
CORPORATION, as Buyer
By: /s/ Edward P. Nordberg, Jr.
----------------------------
Its: Executive Vice President
-------------------------
Address: 2 Wisconsin Circle
Suite 320
Chevy Chase,Maryland 20815
Attention: President
Telephone: 301/664-9827
Facsimile: 301-664-9860
26
<PAGE>
EXHIBIT A
to Purchase and Sale Agreement
MORTGAGE REPRESENTATIONS
(i) With respect to the identity and status of any mortgage loans:
(A) Each mortgage loan was originated by Seller substantially in
conformance with Seller's underwriting criteria, including a review of
the environmental report and appraisal in respect of the related
mortgaged property. Each mortgage loan is secured by the lien of a
mortgage on property operated as a health care facility.
(B) The terms of each mortgage note and the related mortgage have
not been impaired, waived, altered or modified in any respect, except
by written instruments which are in the Mortgage File. No mortgagor
has been released, in whole or in part, except in connection with an
assumption agreement which is part of the Mortgage File. The Mortgage
File has been delivered by Seller to the Buyer or a custodian
designated by the Buyer.
(C) All payments required to be made to the mortgagee for each
mortgage loan under the terms of the related mortgage note (in each
case, subject to a grace period specified in the terms of each
mortgage note) have been made. Each mortgage loan has not been 30
days delinquent more than once during the twelve months preceding the
Purchase Date or, in the case of those mortgage loans originated in
the twelve month period prior to the Purchase Date, since the date of
funding or acquisition. For purposes of the foregoing, a mortgage
loan is not 30 days delinquent until a payment required to be made to
the mortgagee is past due on the succeeding due date.
(D) To Seller's knowledge, there is no material default, breach,
violation or other event permitting acceleration under any mortgage or
the related mortgage note or any of the other documents evidencing,
securing, guaranteeing, insuring or otherwise relating to the mortgage
loan and, to Seller's knowledge, no event has occurred which, with the
passage of time or with notice and the expiration of any grace or cure
period, would constitute such a default, breach, violation or other
event permitting acceleration. Seller has not waived any such
default, breach, violation or other event permitting acceleration. No
foreclosure action, exercise of power of sale or other enforcement
action is, or in the past has been, threatened in writing or commenced
with respect to any mortgage loan.
(E) To Seller's knowledge, there are no delinquent or unpaid
taxes or assessments (including assessments payable in future
A-1
<PAGE>
installments), or other outstanding charges affecting any mortgaged
property which are a lien of equal to, or higher priority than, the
lien of the related mortgage.
(F) With respect to escrow deposits and payments, all such
payments are in the possession of, or under the control of, Seller and
there exist no deficiencies in connection therewith for which
customary arrangements for repayment thereof have not been made.
(G) The servicing and collection practices used by Seller with
respect to such mortgage loans have been in conformity with the Credit
and Collections Policy industry standards.
(H) No mortgage has been satisfied, canceled, rescinded or except
as indicated in the Mortgage File, subordinated and the related
mortgaged property has not been, except as indicated in the Mortgage
File, released from the lien of the mortgage, in whole or in part, nor
has any instrument been executed that would effect any such
satisfaction, cancellation, subordination, rescission or release.
(I) To Seller's knowledge, no mortgagor is a debtor in any State
or Federal bankruptcy or insolvency proceeding.
(J) The "Permitted Exceptions" do not and will not materially and
adversely interfere with (i) the ability of the mortgagor to pay in
full the principal and interest on the mortgage note; or (2) the use
of the mortgaged property for the use currently being made thereof.
"Permitted Exceptions" shall mean those permitted exceptions to which
the title insurance policy for each mortgage loan is subject, as
provided in each such title insurance policy.
(ii) With respect to each mortgaged property:
(A) The mortgaged property consists of an estate in fee simple in
real estate, except with respect to those mortgage loans listed on
Exhibit (ii)-A hereto and as described in paragraph (iii) below, and
--------------
improvements owned by the mortgagor, and, to Seller's knowledge, is
lawfully operated by the mortgagor as a health care facility occupied
and/or operated in accordance with applicable law, including zoning
and building laws and regulations.
(B) To Seller's knowledge, the mortgaged property is free of
material damage and is in good repair, other than as set forth on
Exhibit (ii)-B hereto, and there is no proceeding pending for the
--------------
total or partial condemnation of or affecting the mortgaged property.
(C) The Mortgage File contains a Phase 1 environmental report
prepared by a reputable environmental engineer or consultant. With
respect to each mortgaged property, except as may be set forth on
Exhibit (ii)-C no hazardous material is present on the mortgaged
--------------
property such that (1) the value of such mortgaged property is
A-2
<PAGE>
materially and adversely affected, or (2) under applicable federal,
state or local law, (a) such hazardous material could be required to
be eliminated at a cost materially and adversely affecting the value
of the mortgaged property before such mortgaged property could be
altered, renovated, demolished or transferred or (b) the presence of
such hazardous material could (upon action by the appropriate
governmental authorities) subject the owner of such mortgaged
property, or the holders of a security interest therein, to liability
for the cost of eliminating such hazardous material or the hazard
created thereby at a cost materially and adversely affecting the value
of the mortgaged property. Such mortgaged property is in material
compliance with all applicable federal, state and local laws
pertaining to hazardous material or environmental hazards and neither
Seller nor, to Seller's knowledge, the related mortgagor or any
current tenant thereon, has received any notice of any violation or
potential violation of any such law.
(D) The mortgaged property is contiguous and has adequate ingress
and egress to a physically open, publicly dedicated street and is
adequately serviced by public or on-site water systems, sewer or
septic systems and utilities.
(E) With respect to each mortgaged property, Seller has not
assigned its interest in any leases, any portion of the rents,
additional rents, charges, issues or profits due and payable or to
become due and payable thereunder or subjected such interests such
that the priority of the lien of the mortgage loan in such leases has
been adversely affected.
(iii) With respect to any mortgage loan that is secured in whole or
material part by the interest of a Mortgagor as a lessee under a ground lease of
a mortgaged property (a "Ground Lease"), but not by the related fee interest in
such mortgaged property (the "Fee Interest"), Seller hereby represents and
warrants that:
(A) Such Ground Lease or memorandum thereof or a separate
agreement signed by the applicable lessor has been or will be duly
recorded; such Ground Lease permits the interest of the lessee
thereunder to be encumbered by the related mortgage; and there has
been no material change in the terms of such Ground Lease since its
recordation, with the exception of written instruments which are part
of the related Mortgage File.
(B) Except as may be indicated in the related title insurance
policy, such Ground Lease is not subject to any liens or encumbrances
superior to, or of equal priority with, the related mortgage, other
than the related Fee Interest.
(C) The mortgagee's interest in such Ground Lease is assignable
to Purchaser upon notice to, but without the consent of, the lessor
thereunder (or, if any such consent is required, it has been obtained
prior to the Purchase Date) and, in the event that it is so assigned,
is further assignable by the Purchaser and its successors and assigns
upon notice to, but without a need to obtain the consent of, such
lessor.
A-3
<PAGE>
(D) Such Ground Lease is in full force and effect and no default
has occurred and is continuing under such Ground Lease, nor to
Seller's knowledge is there any existing condition which, but for the
passage of time or the giving of notice, would result in a default
under the terms of such Ground Lease.
(E) Such Ground Lease or a separate agreement signed by the
applicable lessor requires the lessor thereunder to give notice of any
default by the lessee to the mortgagee, provided that the mortgagee
has provided the lessor with notice of its lien in accordance with the
provisions of such Ground Lease; and such Ground Lease, or an estoppel
letter received by the mortgagee from the lessor, further provides
that no notice of termination given under such Ground Lease is
effective against the mortgagee unless a copy has been delivered to
the mortgagee in the manner described in such Ground Lease.
(F) Such Ground Lease or a separate agreement signed by the
applicable lessor provides that the mortgagee is permitted a
reasonable opportunity (including, where necessary, sufficient time to
gain possession of the interest of the lessee under such Ground Lease)
to cure any default under such Ground Lease, which is curable after
the receipt of notice of any such default before the lessor thereunder
may terminate such Ground Lease.
(G) Such Ground Lease has an original term (including any
extension options set forth therein) which extends not less than ten
years beyond the maturity date of the related mortgage loan.
(H) Under the terms of such Ground Lease and the related
mortgage, taken together, any related insurance proceeds other than in
respect of a total or substantially total loss or taking, will be
applied either to the repair or restoration of all or part of the
related mortgaged property, with the mortgagee or a trustee appointed
by it having the right to hold and disburse such proceeds as the
repair or restoration progresses (except in such cases where a
provision entitling another party to hold and disburse such proceeds
would not be viewed as commercially unreasonable by Seller), or to the
payment of the outstanding principal balance of the mortgage loan
together with any accrued interest thereon.
(iv) With respect to any mortgage loan that is secured in whole or in part
by the interest of a Borrower under a Ground Lease and by the related Fee
Interest, Seller hereby represents and warrants that:
(A) Such Fee Interest is subject, and subordinate of record, to
the mortgage, and the mortgage does not by its terms provide that it
will be subordinated to the lien of any other mortgage or other lien
upon such Fee Interest.
(B) Upon occurrence of a default under the terms of the related
mortgage by the mortgagor, the mortgagee has the right to foreclose
A-4
<PAGE>
upon or otherwise exercise its rights with respect to such Fee
Interest within a period of time that would not have been viewed, as
of the date of origination, as commercially unreasonable by Seller.
(v) With respect to the underwriting characteristics of each mortgage loan:
(A) The Mortgage File contains an appraisal of the related
mortgaged property, and the appraisal used to determine the appraised
value of the mortgaged property in connection with the origination of
the mortgage loan was made by an MAI-designated appraiser. At the
time the appraisal was performed, and to Seller's knowledge, such
appraiser had no interest or bias with respect to the parties involved
and had no present or prospective interest, direct or indirect, in the
mortgaged property. The compensation of such appraiser was not
related to the approval or disapproval of the mortgage loan or the
appraised value of the mortgaged property. The appraisal is in a
narrative format, and in form and substance meets the professional
standards of the American Institute of Real Estate Appraisers and the
Society of Real Estate Appraisers. The appraisal states that the
appraiser examined the mortgaged property. No subsequent appraisals
were performed by or on behalf of Seller that are not included in the
Mortgage File.
(B) The proceeds of the mortgage loan have been fully disbursed
and there is no obligation for future advances with respect to the
mortgage loan, and no such advances have been made. No mortgage loan
contains an "earn-out" provision. Any and all requirements as to
completion of any on-site or off-site improvements and as to
disbursements of any escrow funds therefor that were to have been
complied with on or before the date hereof have been complied with.
(C) Seller has not, directly or indirectly, advanced funds, or
received any advance of funds by a party other than the mortgagor, for
or on account of principal and interest payments due on the mortgage
loan.
(vi) with respect to the documentation of each mortgage loan:
(A) Except as provided in the next sentence, the mortgaged
property securing each mortgage loan does not secure any other senior
or parity mortgage indebtedness. With respect to each mortgage loan
that is cross-collateralized with another mortgage loan, each such
other mortgage loan is part of the mortgage loans sold by the Seller
pursuant to this Agreement. No default or event of default shall
occur under the mortgage note or mortgage by reason of a default in
respect of any obligation not directly related to the mortgaged
property other than as set forth in Exhibit (vi)-A hereto.
--------------
(B) The mortgage loan complies in all material respects with the
requirements of applicable local, state and federal laws and
regulations, including, without limitation, usury, equal credit
opportunity, and disclosure laws, and consummation of the sale of the
mortgage loans by Seller to Purchaser contemplated by this Agreement
will not result in the violation of any such laws or regulations.
A-5
<PAGE>
(C) The mortgage note, related mortgage, any guaranty thereof,
any assignment of leases and/or rents, any security agreement and any
chattel mortgage are genuine and each is the legal, valid and binding
obligation of the maker thereof, enforceable in accordance with its
terms, except as such enforcement may be limited by bankruptcy,
insolvency, moratorium or other laws affecting creditors' rights
generally, or by the application of the rules of equity.
(D) The mortgage creates a valid and enforceable first priority
lien on the mortgaged property, including all improvements on the
mortgaged property and all other fixtures, building equipment and
personal property necessary to the operation or maintenance of the
mortgaged property and located thereon, and all additions, alterations
and replacements made at any time with respect to the foregoing,
except as enforceability may be limited by bankruptcy, insolvency,
moratorium or other laws affecting creditor's rights generally or by
the application of the rules of equity. Such lien is subject only to
the exceptions set forth in the lender's title insurance policy
hereinafter referred to. All furniture, fixtures, equipment and all
other personal property covered by any security agreement, assignment
of leases and/or rents, chattel mortgage or equivalent document
related to or delivered in connection with the mortgage loan in those
jurisdictions in which the mortgage cannot include such property, in
accordance with practices which are customary among prudent mortgage
lenders, are subject to a Uniform Commercial Code financing statement
filed and/or recorded in all places necessary to perfect a valid first
priority lien thereon. The mortgage loan does not permit the
mortgagor to require the release of all or any portion of the
mortgaged property from the lien of the related mortgage other than
upon payment in full of the mortgage loan other than as set forth in
Exhibit (vi)-D hereto.
--------------
(E) To Seller's knowledge, after due inquiry, there are no
mechanics' or similar liens or claims which have been filed for work,
labor or material and, as of the date such mortgage loan was closed,
to Seller's knowledge, there are no claims outstanding that under
applicable law could give rise to such lien, affecting the related
mortgaged property which are or may be a lien prior to, or equal or
coordinate with, the lien of the related mortgage.
(F) To Seller's knowledge, the mortgage note and the mortgage are
not subject to any right of rescission, set-off, counterclaim or
defense, including the lawful defense of usury, nor does the operation
of any of the terms of the mortgage note and the mortgage, or the
exercise of any right thereunder, render the mortgage unenforceable
(subject to the limitations on enforceability listed in paragraph
(vi)(C) above), in whole or in part, or subject to any right of
rescission, set-off, counterclaim or presently existing or inchoate
defense, including the defense of usury, and no such right of
rescission, set-off, counterclaim or defense has been asserted to
Seller in writing with respect thereto.
(G) All of the improvements on the property which were considered
in determining the appraised value of the related mortgaged property
A-6
<PAGE>
lie wholly within the boundaries and building restriction lines of
such property, and no improvements on adjoining properties encroach
upon the mortgaged property to have a Material Adverse Effect on the
value of the mortgaged Property except those which are insured against
by the title insurance policy referred to below.
(H) All parties that have had any interest in any mortgage loan,
whether as mortgagee, assignee, pledgee or otherwise, were, during the
period in which they held and disposed of such interest, (1) in
compliance with any and all applicable licensing requirements of the
laws of the state in which the related mortgaged property is located
to the extent necessary to insure the enforceability of the mortgage
loan, (2) organized under the laws of such state, or qualified to do
business in such state, (3) federal savings and loan associations,
savings banks or national banks having principal offices in such
state, or (4) not doing business in such state so as to require
qualification as a foreign corporation to ensure the enforceability of
the mortgage loan; except, in each case, to the extent failure of such
party to be within clauses (1) through (4) does not adversely affect
the enforceability of such mortgage loan.
(I) If the mortgage is a deed of trust, except in connection with
a trustee's sale after default by the Mortgagor, no fees or expenses
are payable to the trustee by Seller, Purchaser or any transferee
thereof.
(J) Either the mortgage contains an assignment of leases or an
assignment of rents or there is a separate document providing for such
assignments, either of which creates in favor of the holder thereof a
valid, perfected and enforceable lien (as limited by bankruptcy law),
of the same priority as the related mortgage, in the property and
rights described therein. Seller has the full right to assign to the
Purchaser such assignment of leases and the lien created thereby as
described in the immediately preceding sentence.
(vii) With respect to insurance coverages:
(A) A title insurance company, qualified to do business in the
state where the related mortgaged property (except in the case of
mortgaged properties located in Iowa) is located, meeting Seller's
underwriting or credit policies in effect at time of origination or
acquisition, has issued a standard American Land Title Association
lender's title insurance policy, or if such policy is not permitted by
applicable law, a policy which is permitted, in favor of Seller and
its successors and assigns as the sole insured thereunder, insuring
the first priority of the lien of the mortgage on such mortgaged
property in the original principal amount of the mortgage loan after
all advances of principal, subject to the exceptions (general and
specific) stated therein. Such Title Policy is assignable to or
endorsable in favor of the Purchaser without the consent of or notice
to the insurer or such consent has been obtained. On the date of the
transfer and assignment of the mortgage loan to the Purchaser, such
Title Policy is valid and in full force and effect, with all premiums
thereon having been paid, and immediately following the transfer and
assignment of such mortgage loan to the Purchaser, such Title Policy
will inure to the benefit of the Purchaser. The Seller has not made
any claim under such Title
A-7
<PAGE>
Policy, and, to Seller's knowledge, no act or omission has occurred
that would materially impair or extinguish the coverage provided by
such policy.
(B) The Title Policy insures the first priority lien of the
mortgage subject only to (1) the lien of then current real property
taxes and assessments not yet due and payable; (2) covenants,
conditions and restrictions, rights of way, easements and other
matters of public record as of the date of recording of the mortgage
which would generally be deemed by prudent institutional mortgage
lenders to be acceptable under the laws of the jurisdiction in which
the mortgaged property is located, or for which affirmative insurance
or endorsements against loss by reason of such matters has been
obtained; and (3) the matters identified in the survey reference
contained in the Title Policy provided that such survey reference does
not indicate that any improvements lie outside the boundaries and
building restriction lines of the mortgaged property or that
improvements on adjoining properties encroach upon the mortgaged
property or easements running thereto, except those which would
generally be deemed by prudent institutional mortgage lenders to be
customary, immaterial or otherwise acceptable under the laws of the
jurisdiction in which the mortgaged property is located and, provided
further, that the Title Policy coverage is not subject to any state of
facts that an accurate survey or personal inspection may show.
(C) All improvements upon the mortgaged property are insured by
an insurer having a General Policy Rating of A/V or better in Best's
Key Rating Guide or, if unavailable, the then equivalent, against loss
by hazards of extended coverage and such other hazards as are
customarily required by a prudent mortgage lender in the area where
the mortgaged property is located in an amount which is at least equal
to the lesser of the outstanding principal balance of the mortgage
loan or the maximum insurable value of the mortgaged property,
provided that, based on the value of the mortgaged property on the
date of origination, such amount is sufficient on such date to avoid
the application of any co-insurance provisions. The related mortgage
obligates the related mortgagor to maintain all such insurance and, at
such mortgagor's failure to do so, authorizes the mortgagee to
maintain such insurance at the mortgagor's cost and expense and to
seek reimbursement therefor from such mortgagor. If any material
improvements constituting a portion of the mortgaged property is in an
area identified in the Federal Register by the Flood Emergency
Management Agency as having special flood hazards, and flood insurance
is available, a flood insurance policy meeting the requirements of the
current guidelines of the Federal Insurance Administration is in
effect with a generally acceptable insurance carrier, in an amount
representing coverage not less than the least of (1), the outstanding
principal balance of the mortgage loan, and (2) the full insurable
value of the mortgaged property, and (3) the maximum amount of
insurance available under the National Flood Insurance Act of 1968, as
amended. All such insurance policies (collectively, the "hazard
insurance policy") contain a standard "New York" mortgagee clause
naming the Purchaser, its successors and assigns (including without
limitation, subsequent owners of the mortgage loan), as mortgagee, are
not terminable and may not be reduced without thirty (30) days' prior
written notice to the
A-8
<PAGE>
mortgagee, and all premiums payable thereon, whether annual or
otherwise, have been paid. No notice of termination or cancellation
has been received with respect to any such hazard insurance policy and
remains uncured. Seller has not engaged in any act or omission which
would materially impair the coverage of any such policy or the
benefits of the mortgagee endorsement.
(D) To Seller's knowledge, no action, error, omission,
misrepresentation, negligence or fraud was made in the origination or
servicing of the mortgage loan that would result in a failure or
impairment of full and timely coverage under any insurance policy
required to be obtained for the mortgage loan.
(E) Any insurance proceeds from policies described in paragraph
(C) above in respect of a casualty loss or taking will be applied
either to the repair or restoration of all or part of the related
mortgaged property, or to the payment of the outstanding principal
balance of such mortgage loan together with any accrued interest
thereon.
(F) The mortgage loan does not permit the mortgagor to obtain
additional financing which would result in a prior or parity lien
against the mortgaged property.
(G) The mortgage contains provision for the acceleration of the
payment of the unpaid principal balance of the mortgage loan in the
event the related mortgaged property is sold without the prior consent
of the Seller thereunder.
(viii) To Seller's knowledge, with respect to each mortgage loan:
(A) The management agreement, if any, is in full force and effect
and there is no default, breach or violation existing thereunder by
any party thereto and no event (other than payments due but not yet
delinquent) which, with the passage of time or with notice and the
expiration of any grace or cure period, would constitute a default,
breach or violation by any party thereunder.
(B) The mortgagor owns and/or possesses, and holds free from
burdensome restrictions or known conflicts with the rights of others,
all material licenses, registrations, permits, certificates,
authorizations and approvals necessary for the operation of the
mortgaged property as it is currently operated.
(C) Neither the execution and delivery of the mortgage note, the
mortgagor's performance thereunder, nor the recordation of the
mortgage, will adversely affect the licenses, registrations, permits,
certificates, authorizations and approvals necessary for the operation
of the nursing home, as applicable.
(ix) Seller hereby represents and warrants to the Purchaser as to each
mortgage loan as of the Purchase Date, as follows:
A-9
<PAGE>
(a) interest on each mortgage loan is calculated on the basis of
a 365/366 days elapsed;
(b) none of the mortgage loans can be repaid by their terms for
an amount less than the outstanding principal amount thereof plus
accrued interest;
(c) no mortgage loan bears interest at a rate that is subject to
a maximum rate calculated by reference to the mortgagor's receipts,
income or profits;
(d) any mortgage loan that provides for deferred interest
provides for the accrual of interest at the related mortgage interest
rate on such deferred interest; and
(e) no mortgage loan provides for payment of a prepayment penalty
or premium other than prepayment penalties or premiums of a type and
in an amount that is customary for such type of mortgage loan.
A-10
<PAGE>
EXHIBIT B
to Purchase and Sale Agreement
FORM OF
SELLER ASSIGNMENT CERTIFICATE
-----------------------------
Reference is made to the Purchase and Sale Agreement, dated as of June 25,
1997 (as the same may be amended, supplemented, amended and restated or
otherwise modified from time to time, the "Agreement") between HCFP FUNDING II,
INC. and WISCONSIN CIRCLE II FUNDING CORPORATION. Unless otherwise defined
herein, capitalized terms used herein have the meanings ascribed to them
pursuant to the Agreement.
The undersigned hereby sells, transfers, assigns, sets over and conveys
unto Buyer and its successors and assigns all right, title and interest of
Seller in, to and under:
(a) the Eligible Receivables created by Seller listed on Schedule 1
attached hereto,
(b) all Related Security with respect to such Eligible Receivables of
Seller,
(c) all proceeds of the foregoing, including without limitation all funds
received by any Person in payment of any amounts owed (including
invoice prices, finance charges, late fees, interest and all other
charges, if any) in respect of any Receivable described above or
Related Security with respect to any such Receivable, or otherwise
applied to repay or discharge any such Receivable and other collateral
or property of any Obligor or any other party directly or indirectly
liable for payment of such Receivables and originally pledged to
Seller, and
(d) all Records relating to any of the foregoing.
This Seller Assignment Certificate is made without recourse but on the
terms and subject to the conditions set forth in the Transaction Documents to
which Seller is a party. Seller acknowledges and agrees that Buyer is accepting
this Seller Assignment Certificate in reliance on the representations,
warranties and covenants of Seller contained in the Transaction Documents to
which Seller is a party.
THIS SELLER ASSIGNMENT CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH
THE AGREEMENT AND THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO
CONFLICT OF LAWS PRINCIPLES.
B-1
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Seller Assignment
Certificate to be duly executed and delivered by its duly Authorized Officer
this ____ day of __________, 1997.
HCFP FUNDING II, INC.
By:
-----------------------------------
Its:
---------------------------
B-2
<PAGE>
SCHEDULE 5.1(f)
to Purchase and Sale Agreement
LITIGATION AND OTHER PROCEEDINGS
--------------------------------
NONE
B-3
<PAGE>
SCHEDULE 5.1(n)
to Purchase and Sale Agreement
OFFICES OF SELLER WHERE
RECORDS ARE MAINTAINED
----------------------
2 Wisconsin Circle
Suite 320
Chevy Chase, Maryland 20815
B-4
<PAGE>
SCHEDULE 5.1(q)
to Purchase and Sale Agreement
LEGAL NAMES
-----------
NONE
TRADE NAMES
-----------
NONE
B-5
<PAGE>
SCHEDULE 5.1(t)
to Purchase and Sale Agreement
SOFTWARE PROGRAMS AND LICENSES
------------------------------
NONE
DOCUMENT #: CHGO03A (29208-00022-3) 285175.6;DATE:06/25/97/TIME:10:47
B-6
<PAGE>
EXHIBIT 10.16
- --------------------------------------------------------------------------------
POOLING AND SERVICING AGREEMENT
dated as of June 27, 1997
among
WISCONSIN CIRCLE II FUNDING CORPORATION,
as Transferor,
HCFP FUNDING II, INC.,
as Servicer,
and
FIRST BANK NATIONAL ASSOCIATION,
as Trustee
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
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<S> <C>
ARTICLE I
DEFINITIONS
SECTION 1.1 Definitions............................................... 1
ARTICLE II
CONVEYANCE OF ASSETS
SECTION 2.1 Creation of the Trust: Conveyance of Certain Assets....... 1
SECTION 2.2 Acceptance by Trustee..................................... 3
SECTION 2.3 Delivery of Related Security Documents.................... 3
SECTION 2.4 Representations and Warranties of Transferor Relating to
the Transferred Assets.................................. 3
SECTION 2.5 No Assumption of Obligations Relating to Receivables,
Related Transferred Assets or Obligor Loan Agreements... 4
ARTICLE III
ADMINISTRATION, SERVICING AND VERIFICATION
SECTION 3.1 Acceptance of Appointment; Other Matters.................. 4
SECTION 3.2 Duties of Servicer and Transferor......................... 5
SECTION 3.3 Reserved.................................................. 7
SECTION 3.4 Compensation of Servicer.................................. 8
SECTION 3.5 Records of Servicer and Reports to be Prepared by
Servicer................................................ 8
SECTION 3.6 Monthly Servicer's Certificate............................ 10
SECTION 3.7 Servicing Report of Independent Public Accountants........ 10
SECTION 3.8 Rights of Trustee......................................... 10
SECTION 3.9 Ongoing Responsibilities of Servicer...................... 11
SECTION 3.10 Further Action Evidencing Transfers....................... 11
ARTICLE IV
RIGHTS OF CERTIFICATEHOLDERS; ALLOCATIONS
SECTION 4.1 Rights of Certificateholders.............................. 12
SECTION 4.2 Establishment of Transaction Accounts..................... 13
SECTION 4.3 Trust-Level Calculations and Funds Allocations............ 14
SECTION 4.4 Interest; Additional Amounts.............................. 14
SECTION 4.5 Periodic Calculations and Allocations..................... 14
SECTION 4.6 Allocations During Revolving Period....................... 15
SECTION 4.7 Allocations of Allocable Funds (Other than During the
Revolving Period)....................................... 15
SECTION 4.8 Withdrawals from the Purchase Account..................... 16
SECTION 4.9 Investment of Funds in Transaction Accounts............... 16
SECTION 4.10 Attachment of Transaction Accounts........................ 16
ARTICLE V
DISTRIBUTIONS AND REPORTS
</TABLE>
(i)
<PAGE>
<TABLE>
<CAPTION>
Page
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<S> <C>
SECTION 5.1 Distributions............................................. 17
SECTION 5.2 Payments in Respect of Transferor Certificate............. 17
SECTION 5.3 Weekly Reports and Monthly Reports........................ 18
SECTION 5.4 Annual Tax Information.................................... 18
SECTION 5.5 Periodic Perfection Certificate........................... 18
ARTICLE VI
THE CERTIFICATES
SECTION 6.1 The Certificates.......................................... 18
SECTION 6.2 Authentication of Certificates............................ 19
SECTION 6.3 Registration of Transfer and Exchange of Certificates..... 19
SECTION 6.4 Mutilated, Destroyed, Lost or Stolen Certificates......... 22
SECTION 6.5 Persons Deemed Owners..................................... 22
SECTION 6.6 Appointment of Paying Agent............................... 22
SECTION 6.7 Access to List of Certificateholders'
Names and Addresses..................................... 23
SECTION 6.8 Authenticating Agent...................................... 23
SECTION 6.9 Tax Treatment............................................. 25
SECTION 6.10 Issuance of Additional Series of Certificates............. 25
SECTION 6.11 Optional Redemption of Investor Interests................. 27
SECTION 6.12 Rule 144A................................................. 27
SECTION 6.13 Optional Call............................................. 27
ARTICLE VII
TRANSFEROR
SECTION 7.1 Representations and Warranties of Transferor Relating to
Transferor and the Transaction Documents................ 27
SECTION 7.2 Covenants of Transferor................................... 30
SECTION 7.3 Indemnification by Transferor............................. 34
ARTICLE VIII
SERVICER
SECTION 8.1 Representations and Warranties of Servicer................ 35
SECTION 8.2 Covenants of Servicer..................................... 36
SECTION 8.3 Merger or Consolidation of or Assumption of the
Obligations of, Servicer................................ 37
SECTION 8.4 Indemnification by Servicer............................... 37
SECTION 8.5 Servicer Liability........................................ 38
SECTION 8.6 Limitation on Liability of Servicer and Others............ 38
ARTICLE IX
EARLY AMORTIZATION EVENTS; TERMINATION BY SELLER
SECTION 9.1 Early Amortization Events................................. 38
SECTION 9.2 Early Amortization Period................................. 40
SECTION 9.3 Remedies.................................................. 40
SECTION 9.4 Additional Rights Upon the Occurrence of Certain Events... 41
ARTICLE X
SERVICER DEFAULTS
</TABLE>
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SECTION 10.1 Servicer Defaults......................................... 42
SECTION 10.2 Trustee to Act; Appointment of Successor.................. 43
SECTION 10.3 Notification of Servicer Default, Notification of
Appointment of Successor Servicer....................... 45
SECTION 10.4 Waiver of Servicer Defaults............................... 45
ARTICLE XI
TRUSTEE
SECTION 11.1 Duties of Trustee......................................... 45
SECTION 11.2 Certain Matters Affecting Trustee......................... 48
SECTION 11.3 Limitation on Liability of Trustee........................ 49
SECTION 11.4 Trustee May Deal with Other Parties....................... 50
SECTION 11.5 Eligibility Requirements for Trustee...................... 50
SECTION 11.6 Resignation or Removal of Trustee......................... 51
SECTION 11.7 Successor Trustee......................................... 51
SECTION 11.8 Merger or Consolidation of Trustee........................ 52
SECTION 11.9 Appointment of Co-Trustee or Separate Trustee............. 52
SECTION 11.10 Tax Returns............................................... 53
SECTION 11.11 Trustee May Enforce Claims Without Possession of
Certificates............................................ 54
SECTION 11.12 Suits for Enforcement..................................... 54
SECTION 11.13 Rights of Required Person to Direct Trustee............... 54
SECTION 11.14 Representations and Warranties of Trustee................. 54
SECTION 11.15 Maintenance of Office or Agency........................... 55
ARTICLE XII
TERMINATION
SECTION 12.1 Termination of Trust...................................... 55
SECTION 12.2 Final Distribution........................................ 56
SECTION 12.3 Rights Upon Termination of the Trust...................... 57
SECTION 12.4 Optional Repurchase of Investor Interests................. 57
ARTICLE XIII
MISCELLANEOUS PROVISIONS
SECTION 13.1 Amendment, Waiver, Consents of Required Person, Etc....... 58
SECTION 13.2 Actions by Certificateholders............................. 59
SECTION 13.3 Limitation on Rights of Certificateholders................ 59
SECTION 13.4 Governing Law............................................. 60
SECTION 13.5 Notices................................................... 60
SECTION 13.6 Severability of Provisions................................ 61
SECTION 13.7 Certificates Nonassessable and Fully Paid................. 61
SECTION 13.8 Nonpetition Covenant...................................... 61
SECTION 13.9 No Waiver; Cumulative Remedies............................ 61
SECTION 13.10 Counterparts.............................................. 61
SECTION 13.11 Third-Party Beneficiaries................................. 61
SECTION 13.12 Integration............................................... 62
SECTION 13.13 Binding Effect; Assignability; Survival of Provisions..... 62
SECTION 13.14 Recourse to Transferred Assets............................ 62
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SECTION 13.15 Submission to Jurisdiction................................ 62
SECTION 13.16 Waiver of Jury Trial...................................... 62
</TABLE>
(iv)
<PAGE>
This POOLING AND SERVICING AGREEMENT, dated as of June __, 1997 (this
"Agreement"), is made among WISCONSIN CIRCLE II FUNDING CORPORATION, a Delaware
corporation ("Transferor"), HCFP FUNDING II, INC., a Delaware corporation, in
its capacity as initial Servicer hereunder ("Servicer"), and FIRST BANK NATIONAL
ASSOCIATION, a national banking association ("Trustee").
ARTICLE I
DEFINITIONS
SECTION 1.1 Definitions. Capitalized terms used in this Agreement have
-----------
the meanings that Appendix A assigns to them, and this Agreement shall be
----------
interpreted in accordance with Part B of Appendix A.
----------
ARTICLE II
CONVEYANCE OF ASSETS
SECTION 2.1 Creation of the Trust: Conveyance of Certain Assets.
---------------------------------------------------
(a) Transferor hereby transfers, assigns, sets over, grants and otherwise
conveys to Trustee, in its capacity as representative of the Certificateholders,
without recourse (except as expressly provided herein), all of its right, title
and interest in, to and under, (i) all Receivables that have been or are
hereafter transferred or purported to be transferred (whether by sale or
contribution) by Seller to Transferor, (ii) all Related Assets, (iii) all of
Transferor's rights under the Transaction Documents (the property described in
clauses (ii) and (iii) being called the "Related Transferred Assets"), (iv) all
- ------------ -----
funds from time to time on deposit in each of the Transaction Accounts and other
proceeds of the foregoing and, in each case, all certificates and instruments,
if any, from time to time evidencing such funds, all investments made with such
funds, all claims thereunder or in connection therewith and all interest,
dividends, monies, instruments, securities and other property from time to time
received, receivable or otherwise distributed in respect of or in exchange for
any or all of the foregoing and (v) all moneys due or to become due and all
amounts received or receivable with respect to any of the foregoing and all
proceeds of the foregoing. Such property, whether now existing or hereafter
acquired, shall constitute the assets of the Trust (collectively, the
"Transferred Assets"). The foregoing transfer, assignment, setover, grant and
conveyance shall be made to the Trustee, on behalf of the Trust, and each
reference in this Agreement to such transfer, assignment, setover and conveyance
shall be construed accordingly.
(b) In connection with the transfer described in subsection (a), with
--------------
respect to the Eligible STL Receivables the Transferor shall deliver to the
Trustee the Mortgage File described in Section 2.3 hereof for each Purchased
-----------
Receivable and all escrowed funds held by the Transferor with respect to such
Receivables and with respect to Eligible ABL Receivables and Eligible SDWW
Receivables, the Trustee shall record and file or cause to be recorded and
filed, at Transferor's expense, Public Notices with respect to the Transferred
Assets meeting the requirements, if any, of applicable law in such manner and in
such jurisdictions as are necessary to perfect the transfer and assignment of
the Transferred Assets to the Trust. In connection with the transfer described
in subsection (a), Transferor further agrees to deliver to Trustee each
--------------
Transferred Asset (including any original documents or instruments included in
the Related Security Documents as are necessary to effect such
<PAGE>
transfer) in which the transfer of an interest is perfected under the UCC or
otherwise by possession. Transferor shall deliver each such Transferred Asset to
Trustee, at the expense of Transferor, immediately upon the transfer of any such
Transferred Asset to Trustee pursuant to subsection (a).
--------------
(c) In connection with the transfer described above in subsection (a), with
--------------
respect to Eligible ABL Receivables and Eligible SDWW Receivables Servicer
shall, on behalf of Transferor, on or prior to each Subsequent Closing Date,
deliver a copy of Seller's and Buyer's records evidencing the Receivables to
Trustee and shall mark such records and related Obligor Loan Agreements with the
following legend:
THE RECEIVABLES DESCRIBED HEREIN HAVE BEEN SOLD TO WISCONSIN CIRCLE II
FUNDING CORPORATION ("BUYER") PURSUANT TO A PURCHASE AND SALE AGREEMENT,
DATED AS OF JUNE 25, 1997, BETWEEN HEALTHCARE FINANCIAL FUNDING II, L.P.
AND BUYER; AND SUCH RECEIVABLES HAVE BEEN TRANSFERRED TO THE STL 1997-1
TRUST PURSUANT TO A POOLING AND SERVICING AGREEMENT, DATED AS OF THE SAME
DATE, AMONG BUYER, AS TRANSFEROR, HEALTHCARE FINANCIAL PARTNERS, INC. AS
THE INITIAL SERVICER, AND FIRST BANK NATIONAL ASSOCIATION, AS TRUSTEE.
(d) Upon the request of Transferor, Trustee will cause Certificates in
authorized denominations evidencing the entire interest in the Trust to be duly
authenticated and delivered to or upon the order of Transferor pursuant to
Section 6.2. Pursuant to the Transferor Certificate, Transferor shall be
- -----------
entitled to receive payments for the Certificates at the times and in the
amounts specified in the related Certificate Purchase Agreements executed from
time to time.
(e) If the transfer, assignment, set-over, grant and conveyance described
in subsection (a) of this Section 2.1 are deemed to create a security interest
-------------- -----------
in the property described therein, Transferor hereby grants to Trustee, for the
benefit of Trustee and the Certificateholders, a lien on and security interest
in that property, whether now owned or hereafter acquired (which shall be deemed
to be a first priority perfected lien and security interest and shall secure
Transferor's obligations under the Transaction Documents and the Certificates),
and agrees that this Agreement shall constitute a security agreement under
applicable law.
In connection with each transfer, Transferor shall provide Trustee with a
listing of all Receivables and Related Assets being transferred on such
Subsequent Closing Date, the Records with respect thereto, any required Public
Notices and the actions and/or documentations by which the Trustee shall receive
an ownership interest in such Transferred Assets or a valid and perfected first
priority security interest in such Transferred Assets. The Trustee may relay on
such listing, or may, in its sole discretion seek and rely upon the advice of
its own counsel.
SECTION 2.2 Acceptance by Trustee. Trustee hereby acknowledges its
---------------------
acceptance on behalf of the Trust of all right, title and interest to the
Transferred Assets and declares that it shall maintain such right, title and
interest, upon the trust herein set forth, for the benefit of all
Certificateholders, on the terms and subject to the conditions hereinafter set
forth.
2
<PAGE>
SECTION 2.3 Delivery of Related Security Documents. Each Mortgage File
--------------------------------------
delivered pursuant to Section 2.1 hereof shall consist of the documents
-----------
described in Section 1.7 of the Purchase and Sale Agreement.
-----------
SECTION 2.4 Representations and Warranties of Transferor Relating to the
------------------------------------------------------------
Transferred Assets.
- ------------------
(a) Representations and Warranties. At the time that any Receivable or
other Transferred Asset is transferred by Transferor to the Trust, Transferor
hereby represents and warrants that:
(i) Quality of Title.
(A) Immediately before each transfer to be made by Transferor
hereunder, each Receivable and other Transferred Asset that was then to be
transferred to the Trust hereunder was owned by Transferor free and clear of
any Adverse Claim (other than any Permitted Adverse Claim); and on or before
the Closing Date, Transferor made, or caused to be made, all filings and
took all other action under applicable law in each relevant jurisdiction in
order to protect and perfect or permit the Trustee to protect and perfect
the Trust's interest in such Receivables and such Transferred Assets against
all creditors of, and purchasers from, Transferor and Seller.
(B) Each transfer of Receivables and other Transferred Assets by
Transferor to the Trust pursuant to this Agreement constitutes a valid
transfer and assignment to Trustee of all right, title and interest of
Transferor in such Receivables and other Transferred Assets, free and clear
of any Adverse Claim (other than any Permitted Adverse Claim), and
constitutes either an absolute transfer of such property to the Trust or a
grant of a first priority perfected security interest in such property to
the Trust. Whenever the Trust accepts a transfer of a Receivable or other
Transferred Asset hereunder, it shall have acquired ownership of or a valid
and perfected first priority security interest in such Receivable or other
Transferred Asset free and clear of any Adverse Claim (other than any
Permitted Adverse Claim).
(C) No effective Public Notice that covers all or part of any
Transferred Asset is on file in any recording office except such as may be
filed (i) in favor of Seller in accordance with the Obligor Loan Agreements,
(ii) in favor of Transferor pursuant to the Purchase Agreement and (iii) in
favor of Trustee, for the benefit of the Investor Certificateholders, in
accordance with this Agreement.
(D) Transferor is, and after the consummation of the transactions
contemplated by this Agreement, will be Solvent.
(ii) Approvals. With respect to each Receivable and other Transferred
Asset, all consents, licenses, approvals or authorizations of, or notices to
or registrations, declarations or filings with, any Governmental Authority
or other Person required to be obtained, effected or made by Transferor in
connection with the conveyance of the Receivable and other Transferred Asset
by Transferor to the Trust, have been duly obtained, effected or given and
are in full force and effect.
3
<PAGE>
(iii) Eligible Receivables. On the date on which Transferor transfers a
Receivable to the Trust, such Receivable is an Eligible Receivable.
(b) Notice of Breach. The representations and warranties set forth in
subsection (a) shall survive the transfer of the Receivables and the other
- --------------
Transferred Assets to the Trust. Upon discovery by Transferor, Servicer or
Trustee of a breach of any of the representations and warranties set forth in
subsection (a), the party discovering the breach shall give written notice to
- --------------
the other parties to this Agreement and the Required Person within three
Business Days following the discovery. Trustee's obligations in respect of
discovering any breach are limited as provided in Section 11.2(h).
---------------
SECTION 2.5 No Assumption of Obligations Relating to Receivables, Related
-------------------------------------------------------------
Transferred Assets or Obligor Loan Agreements. The transfer, assignment, set
- ---------------------------------------------
over, grant and conveyance described in Section 2.1 does not constitute and is
-----------
not intended to result in a creation or an assumption by the Trust, Trustee or
any Investor Certificateholder of any obligation of Servicer, Transferor, Seller
or any other Person in connection with the Receivables or the Related
Transferred Assets or under the related Obligor Loan Agreements or any other
agreement or instrument relating thereto. None of Trustee, the Trust or any
Investor Certificateholder shall have any obligation or liability to any
Obligor.
ARTICLE III
ADMINISTRATION, SERVICING AND VERIFICATION
SECTION 3.1 Acceptance of Appointment; Other Matters.
----------------------------------------
(a) Designation of Servicer. The collection of the Receivables and the
Related Assets shall be conducted, under the supervision and monitoring of the
Person designated as Servicer hereunder from time to time. Servicer shall
service and administer the Receivables and the Related Transferred Assets.
Until Trustee gives a Termination Notice to Servicer pursuant to Section 10.1,
------------
HCFP Funding II, Inc. is designated (and agrees to act) as Servicer.
(b) Delegation of Certain Servicing Activities. In the ordinary course of
business, Servicer may at any time delegate its duties hereunder with respect to
the Receivables and the Related Transferred Assets to any Person. Each Person
to whom any such duties are delegated in accordance with this Section is called
a "Sub-Servicer". Notwithstanding any such delegation, Servicer shall remain
liable for the performance of all duties and obligations of Servicer pursuant to
the terms of this Agreement and the other Transaction Documents. The fees and
expenses of any Sub-Servicers shall be as agreed between Servicer and the Sub-
Servicers from time to time and none of the Trust, Trustee or any
Certificateholder shall have any responsibility therefor. Upon any termination
of a Servicer pursuant to Section 10.1, all Sub-Servicers designated pursuant to
------------
this subsection by such Servicer shall automatically also be terminated.
(c) Termination. The designation of Servicer (and each Sub-Servicer) under
this Agreement shall automatically terminate upon termination of the Trust
pursuant to Section 12.1.
------------
(d) Resignation of Servicer. Servicer shall not resign as Servicer unless
it determines that (i) the performance of its duties is no longer permissible
under applicable law and (ii) there is no reasonable action that it could take
to make the performance of its duties permissible under applicable
4
<PAGE>
law. If Servicer determines that it must resign for the reasons stated above, it
shall, prior to the tendering of its resignation, deliver to Trustee an Opinion
of Counsel confirming the satisfaction of the conditions set forth in the
preceding sentence. No resignation by Servicer shall become effective until
Trustee or another Successor Servicer shall have assumed the responsibilities
and obligations of the resigning Servicer in accordance with Section 10.2.
------------
Trustee shall give prompt notice to the Required Person of the appointment of
any Successor Servicer.
SECTION 3.2 Duties of Servicer and Transferor.
---------------------------------
(a) Duties of Servicer in General. Servicer shall service and administer
the Receivables and the Related Transferred Assets and shall monitor and
supervise the collection of the Receivables and the Related Transferred Assets.
Servicer shall pay all expenses associated with the enforcement and collection
of the Receivables, including without limitation all Servicing Advances.
Subject to the terms and provisions of this Agreement, Servicer shall have full
power and authority, acting alone or through any Sub-Servicer, to do any and all
things in connection with such monitoring, supervision, servicing and
administering that it may deem necessary or appropriate. Trustee shall execute
and deliver to Servicer any powers of attorney or other instruments or documents
that are prepared by Servicer and stated in an Officer's Certificate to be, and
shall furnish Servicer with any documents in its possession, necessary or
appropriate to enable Servicer to carry out its duties. Servicer shall exercise
at least the same care and apply the same policies with respect to the
collection and servicing of the Receivables and the Related Transferred Assets
that it would exercise and apply if it were a prudent person owning and
servicing such Receivables and Related Transferred Assets for its own account,
all in substantial compliance with applicable law and in accordance with the
applicable Credit and Collections Policy in the form of Exhibit G.
---------
Servicer shall take or cause to be taken (and shall cause each Sub-Servicer
(if any) to take or cause to be taken) all such actions as Servicer deems
necessary or appropriate to collect or cause to be collected each Receivable and
Related Transferred Asset, all in substantial compliance with applicable law,
the standard of care described in the prior paragraph and the applicable Credit
and Collections Policy.
Without limiting the generality of the foregoing and subject to the next
preceding paragraph and Section 10.1, Servicer or its designee is hereby
------------
authorized and empowered, unless such power and authority is revoked by Trustee
on account of the occurrence of a Servicer Default, (i) to instruct Trustee to
make withdrawals and payments from the Transaction Accounts as set forth in this
Agreement, (ii) to execute and deliver, on behalf of the Trust for the benefit
of the Certificateholders, any and all instruments of satisfaction or
cancellation, or of partial or full release or discharge, and all other
comparable instruments, with respect to the Receivables and the Related
Transferred Assets, (iii) to make any filings, reports, notices, applications
and registrations with, and to seek any consents or authorizations from, the
Securities and Exchange Commission and any state securities authority on behalf
of the Trust as may be necessary or appropriate to comply with any Federal or
state securities laws or reporting requirements or other laws or regulations,
and (iv) to the extent permitted under and in compliance with the Credit and
Collections Policy and with all applicable laws, rules, regulations, judgments,
orders and decrees of courts and other Governmental Authorities (whether
Federal, state, local or foreign) and all other tribunals, to commence or
settle, collection proceedings with respect to the Receivables and otherwise to
enforce the rights and interests of the Trust and the Certificateholders in, to
and under the Receivables or Related Transferred Assets (as applicable). Trustee
shall cooperate in the giving of any releases as shall be reasonably requested
by Servicer.
5
<PAGE>
(b) Identification and Transfer of Collections. Servicer shall cause
Collections and all other Transferred Assets that consist of cash or cash
equivalents to be deposited into the Transaction Accounts pursuant to the terms
and provisions of Section 3.3 and Article IV. Following discovery by Servicer
----------- ----------
that collections of any receivable or other asset that is not a Collection of a
Purchased Asset, any other Transferred Asset have been deposited into or any
Transaction Accounts, Servicer shall cause all such collections to be
segregated, apart and in different accounts, from the Transaction Accounts.
Servicer and, to the extent applicable, Trustee shall hold all such funds in
trust, separate and apart from such Person's other funds. On each Business Day,
after such misdirected collections have been reasonably identified by Servicer
to Trustee, Servicer shall instruct Trustee to, and Trustee shall, turn over to
the appropriate Bank, Seller or other applicable Related Person (or their
designees) all such misdirected collections less all reasonable and appropriate
out-of-pocket costs and expenses, if any, incurred by Servicer or Trustee in
collecting and otherwise administering such amounts.
Following notification from a Bank that any item earlier paid to the Master
Collection Account has been returned or is uncollected and that such Bank has
not been otherwise reimbursed pursuant to the terms of the applicable Bank
Account Agreement from any amounts it credited to the relevant Bank Account and
that were otherwise to be transferred to the Master Collection Account, Servicer
shall instruct Trustee to, and Trustee shall, turn over to such Bank Collections
in such amount from Collections on deposit in the Master Collection Account.
(c) Modification of Receivables. So long as no Servicer Default shall have
occurred and be continuing, Servicer may adjust, in accordance with Sections
--------
3.2(a) and 3.2(f) and the Collections Policy, the Unpaid Balance of any
- -----------------
Receivable, or otherwise modify the terms of any Receivable, all as it may
determine to be appropriate to maximize collection thereof. Servicer shall, or
shall cause the applicable Sub-Servicer to, write-off Receivables from time to
time in accordance with the Credit and Collections Policy.
(d) Identification of Eligible Receivables; Verification Procedures;
Verification Notices. Servicer will establish and maintain such procedures (the
"Verification Procedures") as are necessary for determining on each Subsequent
Closing Date, and otherwise weekly, whether each Receivable qualifies as an
Eligible Receivable, and for identifying weekly all Receivables among Purchased
Assets that are not Eligible Receivables. Without limiting the generality of
the foregoing, the Verification Procedures shall include the following:
(1) verifying that each Receivable is an Eligible Receivable and
producing and delivering to Servicer and the Trustee [RATED CALL
DETAIL TAPES] of all Eligible Receivables;
(2) including with each Purchase Report a notice accompanying such
report (a "Verification Notice") containing information that
shows whether, and to what extent, the Receivables described in
such Monthly Report or Purchase Report are Eligible Receivables
and any other variances discovered by Servicer in its performance
of the Verification Procedures.
(e) Grant of Power of Attorney. Transferor and Trustee hereby each grant
to Servicer a power of attorney, with full power of substitution, to take in the
name of Transferor and Trustee all steps that are necessary or appropriate to
endorse, negotiate, deposit or otherwise realize on any writing of any kind held
or transmitted by Transferor or transmitted or received by Trustee (whether
6
<PAGE>
or not from Transferor) in connection with any Receivable or Related Transferred
Asset; provided, however, that without Trustee's prior written consent, Servicer
may not take any action pursuant to this Section 3.2(f) that would have the
effect of joining Trustee to any litigation. The power of attorney that
Transferor and Trustee have granted to Servicer may be revoked by Trustee, and
shall be revoked by Transferor, on the date on which Trustee shall be entitled
to exercise the powers granted to Trustee pursuant to Section 3.8(a). In
--------------
exercising its power granted hereby, Servicer shall take directions from
Trustee, if any, arising out of the exercise of the rights granted under Section
-------
11.14.
- -----
(f) Turnover of Collections. If Servicer, Transferor or any of their
respective agents or representatives shall at any time receive any cash, checks
or other payments constituting Collections, such recipient shall segregate such
payments and hold such payments in trust for Trustee and shall, promptly upon
receipt (and in any event within one Business Day following receipt), remit all
such cash, checks and other payments, duly endorsed or with duly executed
instruments of transfer, if applicable, to the Master Collection Account.
(g) Semi-Annual Statement as to Compliance. Servicer will deliver to
Trustee and the Required Person no later than 45 days after the end of each
semi-annual fiscal period (commencing with the 6-month period ended September
30, 1997), an Officer's Certificate, substantially in the form of Exhibit F,
---------
stating, as to each signer thereof, that (i) a review of the activities of
Servicer during the preceding 6-month period and of performance under this
Agreement has been made under such officer's supervision and (ii) to the best of
such officer's knowledge, based on such review, Servicer has fulfilled all its
obligations under this Agreement throughout such period, or, if there has been a
default in the fulfillment of any such obligation, specifying each such default
known to such officer and the nature and status thereof and remedies therefor
being pursued.
SECTION 3.3 Reserved.
--------
SECTION 3.4 Compensation of Servicer.
------------------------
(a) As full compensation for its servicing activities hereunder, and in
consideration for Servicer's incurring expenses associated with the enforcement
and collection of the Receivables, Servicer shall be entitled to receive a
monthly servicing fee (the "Servicing Fee") in respect of each Series, payable
in arrears on each Distribution Date in respect of each Distribution Period (or
portion thereof) during which that Series is outstanding.
The Servicing Fee payable for any Distribution Period with respect to any
Series shall be equal to one-twelfth of the product of (a) 0.75% multiplied by
(b) the aggregate Unpaid Balance of the Receivables as measured on the first
Business Day of that Distribution Period. The fees, costs and expenses of
Trustee, the Paying Agent, any authenticating agent, the Banks and the Transfer
Agent and Registrar, and certain other costs and expenses payable from the
Servicing Fee pursuant to other provisions of this Agreement, and all other fees
and expenses that are not expressly stated in this Agreement to be payable by
the Trust or Transferor, other than Federal, state, local and foreign income and
franchise taxes, if any, or any interest or penalties with respect thereto, of
the Trust, shall be paid out of the Servicing Fee and shall be paid by Servicer
from the funds that constitute the Servicing Fee.
SECTION 3.5 Records of Servicer and Reports to be Prepared by Servicer.
----------------------------------------------------------
7
<PAGE>
(a) Keeping of Records and Books of Account. Servicer shall maintain at
all times accurate and complete books, records and accounts relating to the
Receivables, other Transferred Assets and Obligor Loan Agreements of Seller and
all Collections thereon in which timely entries shall be made. Servicer shall,
or shall cause each Sub-Servicer to, maintain and implement administrative and
operating procedures (including an ability to generate duplicates of Records
evidencing Receivables and the other Transferred Assets in the event of the
destruction of the originals thereof), and shall keep and maintain all
documents, books, records and other information that Servicer deems reasonably
necessary for the collection of all Receivables and Related Transferred Assets.
Upon the request of Trustee or any Required Person after the occurrence and
continuance of a Servicer Default, Servicer will deliver copies of all books and
records maintained pursuant to this Section 3.5(a) to such Trustee or Required
--------------
Person.
(b) Receivables Reviews. Servicer, any Sub-Servicer and Transferor (for
purposes of this paragraph, the "Reviewed Party") shall, during regular business
hours, permit Trustee (or such other Person whom Trustee may designate from time
to time), any Required Person or their respective agents or representatives
(including certified public accountants or other auditors, attorneys), whenever
such Person deems it appropriate, (i) to examine and make copies of and
abstracts from, and to conduct accounting reviews of, all Records in the
possession or under the control of the Reviewed Party, including the related
Obligor Loan Agreements and other agreements related thereto, and (ii) to visit
the offices and properties of the Reviewed Party for the purpose of examining
such materials described in clause (i) above, and to discuss matters relating to
----------
the Receivables or the Related Transferred Assets or the performance by the
Reviewed Party of their respective obligations under any Transaction Document
with any Authorized Officer of the Reviewed Party or with employees of the
Reviewed Party having knowledge of such matters. Each review of a Reviewed
Party shall require not less than five Business Days' prior notice to the
Reviewed Party, unless such Reviewed Party is in default under any Transaction
Document, in which event only one Business Days' prior notice shall be required.
(c) Monthly Report. Prior to 3:00 p.m., New York City time, on each Report
Date, Servicer shall prepare and deliver to Trustee, and the Required Person a
report relating to the following (each such report being a "Monthly Report"):
(i) Eligible Receivables performance data, including aging
reports, pool analytic reports, and static pool reports,
(ii) Eligible Receivables stratification reports providing
information that is at least sufficient to track the Receivable's
eligibility criteria,
(iii) summary of litigation to which Seller, Buyer, or any
Obligor is a party,
(iv) monthly comparisons of budget to actual performance for
Servicer and Seller,
(v) monthly diskette listing of all Purchased Assets to date,
specifying what was purchased during prior month,
(vi) list of Receivables among Transferred Assets that remain
Eligible Receivables as of the end of the most recent Calculation Period and
a list of all Receivables which have become non-Eligible Receivables, with a
description of their disqualifying condition, and
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(vii) such other information, or modification of the foregoing,
as the Trustee or Required Person may reasonably request.
Servicer shall retain a duplicate of each Monthly Report and shall update
all software as necessary during the term of this Agreement.
(d) On or before 45 days after the end of each calendar year beginning with
1998, Servicer will prepare and deliver to Trustee and the Required Person a
report as to each of the following:
(i) the budget for the subsequent calendar year for Seller and
Servicer,
(ii) two-year projections and strategic business plan for each of
Seller and Servicer,
(iii) a summary of existing licenses for each of Seller and
Servicer.
(e) Servicer shall promptly prepare and deliver to Trustee and the Required
Person such other reports as may be reasonably requested from time to time.
SECTION 3.6 Monthly Servicer's Certificate. On each Report Date, Servicer
------------------------------
shall deliver to Trustee, the Paying Agent, Transferor, and the Required Person
a certificate of an Authorized Officer of Servicer substantially in the form of
Exhibit C, with such additions as may be reasonably required by Trustee or the
- ---------
Required Person.
SECTION 3.7 Servicing Report of Independent Public Accountants.
--------------------------------------------------
(a) On or before 120 days after the end of each calendar year beginning
with 1998 (each such year being, for the purposes of this paragraph, a
"Servicing Compliance Report Period"), Servicer shall, as an expense of Servicer
paid out of the Servicing Fee, cause a firm of independent certified public
accountants that is generally recognized as being among the "big six" (which may
also render other services to Servicer, Seller or Transferor) or such other
public accounting firm as is acceptable to the Required Person, to furnish a
report to Trustee, Servicer, Transferor and the Required Person (which report
shall be addressed to Trustee and the Required Person and shall relate to the
most recently ended Servicing Compliance Report Period). The accountants'
report shall set forth the results of their performance of the procedures
described in Exhibit D with respect to the Monthly Reports delivered to Trustee
---------
pursuant to Section 3.5 during such prior Servicing Compliance Report Period.
-----------
(b) Each accountants' report shall state that the accountants have compared
the amounts contained in the Monthly Reports and a sample randomly selected from
all Monthly Reports delivered to Trustee during the period covered by the report
with the records (including computer records) from which the amounts were
derived and that, on the basis of such comparison, the amounts are in agreement
with the documents and records, except for such exceptions as they believe to be
immaterial and such other exceptions as shall be set forth in the report. A
copy of the report may be obtained by any Investor Certificateholder by a
request in writing to Trustee addressed to the Corporate Trust Office.
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SECTION 3.8 Rights of Trustee.
-----------------
(a) Trustee has the exclusive dominion and control over the Transaction
Accounts, and Transferor shall take any action that Trustee may reasonably
request to effect or evidence such dominion and control. At any time following
the occurrence of a Servicer Default, Trustee is hereby authorized to give
instructions or take any other actions with respect to the Transaction Accounts
that Servicer would otherwise be authorized to give or to take.
(b) At any time following the occurrence of a Servicer Default, each of
Transferor and Servicer hereby authorizes Trustee to take any and all steps in
Transferor's name and on behalf of Transferor and Servicer that are necessary or
appropriate, in the reasonable determination of Trustee, to collect all amounts
due under any and all Receivables or other Transferred Assets, including
endorsing the name of Transferor or Seller on checks and other instruments
representing Collections and enforcing such Receivables and the other
Transferred Assets.
(c) Transferor hereby irrevocably appoints Trustee to act as Transferor's
attorney-in-fact, with full authority in the place and stead of Transferor and
in the name of Transferor or otherwise, to take upon the occurrence and during
the continuance of a Service Default (subject to Section 11.14 hereof) any
-------------
action and to execute any instrument or document that Trustee, in its reasonable
determination, may deem necessary to accomplish the purposes of this Agreement,
including:
(i) to ask, demand, collect, sue for, recover, compromise, receive
acquittance and receipts for moneys due and to become due under or in
respect of any Receivable or any Related Transferred Asset;
(ii) to receive, endorse and collect any drafts or other instruments,
documents and chattel paper, in connection with clause (i);
----------
(iii) to file any claims or take any action or institute any
proceedings that Trustee in its reasonable determination may deem necessary
or appropriate for the collection of any of the Receivables or any other
Transferred Asset or otherwise to enforce the rights of Trustee and the
Certificateholders with respect to any of the Receivables or any other
Transferred Asset; and
(iv) to exercise the rights or perform the affirmative obligations of
Transferor under any Transaction Document.
Transferor hereby acknowledges, consents and agrees that the power of attorney
granted pursuant to this Section is irrevocable and coupled with an interest.
SECTION 3.9 Ongoing Responsibilities of Servicer. Anything herein to the
------------------------------------
contrary notwithstanding, Servicer shall deliver or cause to be delivered all
Collections received by it or any Subservicer to Trustee no later than two
Business Days after receipt thereof. So long as Servicer or any Subservicer
shall hold any Collections required to be paid to Trustee, each of them shall
hold (and Servicer shall cause each of them to hold) such amounts in trust (and
separate and apart from their own funds) and shall clearly mark (and Servicer
shall cause each of them to clearly mark) their records to reflect such trust.
Servicer hereby grants to Trustee an irrevocable power of attorney, with full
power of substitution, coupled with an interest, upon the occurrence of a
Servicer Default, to take
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in the name of Servicer all steps necessary or appropriate to endorse, negotiate
or otherwise realize on any writing or other right of any kind held or
transmitted by Servicer or transmitted and received by Trustee (whether or not
from Servicer) in connection with any Receivable or other Transferred Asset.
SECTION 3.10 Further Action Evidencing Transfers. To further
-----------------------------------
evidence, secure and perfect the transfer of the Transferred Assets to Trustee,
Transferor, Trustee and Servicer shall do the following:
(a) Servicer and Trustee shall direct all Obligors to pay all amounts
payable under any Receivable or any Related Transferred Assets directly to the
Master Collection Account for the benefit of Trustee or its designee; provided
that Trustee shall provide Seller with a copy of such notice at least one
Business Day prior to sending it to any Obligor and consult in good faith with
Seller as to the text of the notice.
(b) Transferor and Trustee shall direct Seller to make payment of all
amounts payable to Transferor under the Purchase Agreement directly to the
Master Collection Account for the benefit of Trustee or its designee.
(c) Transferor shall give notice of the Trust's ownership of the Receivables
and the other Transferred Assets to each Obligor, and direct that such Persons
may be informed of any change in such ownership interest only by subsequent
written notice from Trustee.
(d) Transferor shall (A) assemble all, or cause the assembly of all, the
Records that are necessary or appropriate to collect the Receivables and other
Transferred Assets, and shall make the same available to Servicer and Trustee at
one or more places selected by Servicer, Trustee or their designees, (B)
segregate all cash, checks and other payments received by it from time to time
constituting Collections in a manner acceptable to Trustee and shall, promptly
upon receipt (and, subject to Section 3.2(f), in no event later than the first
--------------
Business Day following receipt), remit all such cash, checks and other payments,
duly endorsed or with duly executed instruments of transfer, if applicable, to
or the Master Collection Account and (C) permit, upon not less than two Business
Days' prior written notice, any Servicer and its agents, employees and assignees
access to their respective facilities and their respective Records (including
computer programs, tapes and disks, invoices and other agreements related to the
Transferred Assets).
(e) Servicer shall cause all Public Notices, Mortgage File documents and any
other necessary documents relating to the right, title and interest of Trustee
in, to and under the Transferred Assets to be promptly recorded, registered and
filed, and at all times to be kept recorded, registered and filed, to the extent
and in such manner and in such places as may be required by law fully to
preserve, maintain and protect the right, title and interest of Trustee
hereunder in and to all property comprising the Transferred Assets. Servicer
shall deliver to Trustee file-stamped copies of, or filing receipts for, any
document recorded, registered or filed as provided above, as soon as available
following such recording, registration or filing. Transferor shall cooperate
fully with Servicer in connection with the obligations set forth above and will
execute any and all documents that are reasonably required to fulfill the intent
of this section.
(f) If Transferor or Servicer fails to perform any of its agreements or
obligations under any Transaction Document and does not remedy such failure
within the applicable cure period, if any,
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then Trustee or its designee may (but shall not be required to) itself perform,
or cause performance of, such agreement or obligation, and the reasonable
expenses of Trustee or its designee incurred in connection therewith shall be
payable by Servicer as provided in Section 11.5 and (if applicable) by
------------
Transferor as provided in Section 7.3.
------------
ARTICLE IV
RIGHTS OF CERTIFICATEHOLDERS; ALLOCATIONS
SECTION 4.1 Rights of Certificateholders. The Investor Certificates shall
----------------------------
collectively represent a fractional undivided beneficial interest in the Trust,
representing the right to receive, to the extent necessary to make the required
payments with respect to that Certificate at the times and in the amounts
specified in this Article IV, the portion of Collections allocable to Investor
----------
Certificateholders pursuant to this Agreement and funds on deposit in the
Transaction Accounts allocable to Investor Certificateholders. The Transferor
Certificate shall represent an interest in the Trust (the "Transferor Interest")
consisting of the right to receive current and deferred transfer payments in the
amounts specified herein.
SECTION 4.2 Establishment of Transaction Accounts.
-------------------------------------
(a) On or prior to the date of this Agreement, Trustee has established, and
until the Trust is terminated Trustee shall (except as expressly permitted or
required below) maintain, in the name of Trustee and for the benefit of the
Certificateholders, the following accounts:
(i) account no. _________________, which shall be called the
"Master Collection Account" and into which all Collections and all other
Transferred Assets consisting of cash or cash equivalents shall be deposited
or transferred as provided for in this Agreement;
(ii) account no. _________________, which shall be called the
"Carrying Cost Account" and into which funds shall be allocated from the
Master Collection Account from time to time to cover Carrying Costs
(including interest payable on, and the Servicing Fee allocated to the
Investor Certificates);
(iii) account no. ___________________, which shall be called the
"Purchase Account" and into which funds may from time to time be transferred
from the Master Collection Account for the purchase of new Receivables on
Subsequent Closing Dates for the outstanding Series;
(iv) account no. ___________________, which shall be called the
"Principal Funding Account" and into which funds will from time to time be
transferred from the Master Collection Account in anticipation of
distributions to Investor Certificateholders on account of their respective
principal investments;
(v) account no. ___________________, which shall be called the
"Reserve Account" and into which funds will be deposited from the Master
Collection Account to the extent so provided herein; and
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(vi) account no. ___________________, which shall be called the
"Overcollateralization Account" and into which funds will be deposited from
the Master Collection Account to the extent so provided herein.
(b) The Master Collection Account, the Carrying Cost Account, the Purchase
Account, the Principal Funding Account, the Reserve Account and the
Overcollateralization Account are collectively called the "Transaction
Accounts." Each of the Transaction Accounts shall be established and maintained
as a segregated trust account maintained at a bank with a long-term senior
unsecured debt rating of at least "A" and shall bear a designation clearly
indicating that funds deposited therein are held for the benefit of the
Certificateholders. If any Transaction Account ceases to be a segregated trust
account maintained at a bank with a long-term senior unsecured debt rating of at
least "A", Trustee shall open a substitute Transaction Account that is a
segregated trust account maintained at a bank with a long-term senior unsecured
debt rating of at least "A" and transfer the funds in the existing Transaction
Account to the substitute Transaction Account, and thereafter all references in
any Transaction Document to the original Transaction Account shall be deemed
instead to refer to the substitute Transaction Account.
(c) Trustee shall possess (for its benefit and for the benefit of the
Certificateholders) all right, title and interest in and to all funds on deposit
from time to time in each of the Transaction Accounts and in all proceeds
thereof. The Transaction Accounts shall be under the sole dominion and control
of Trustee for the benefit of the applicable Certificateholders. Each of
Servicer and Trustee agrees that it shall have no right of setoff against, and
no right otherwise to deduct from, any funds held in any of the Transaction
Accounts or the Bank Accounts for any amount owed to it by the Trust, any party
hereto or any Certificateholder unless such right to deduct is expressly
provided for in a Transaction Document.
SECTION 4.3 Trust-Level Calculations and Funds Allocations. On each
----------------------------------------------
Business Day, Servicer shall determine the amount of Collected Funds received
(other than funds that are required to be returned to Related Persons (or their
designees)) since the preceding Business Day and shall allocate the funds to the
Transaction Accounts.
SECTION 4.4 Interest; Additional Amounts.
----------------------------
(a) Accrued and unpaid interest on the Invested Amount shall be calculated
on the basis of actual days over a year of 360 days and shall be payable on each
Distribution Date.
(b) Interest on the Class A Invested Amount shall accrue at a rate per annum
equal to LIBOR in effect on the most recent Distribution Date plus the Class A
Certificate Spread.
(c) Additional Amounts shall also be payable with respect to the Series
1997-1 Certificates, but only to the extent that funds become available for such
Additional Amounts.
SECTION 4.5 Periodic Calculations and Allocations. On each Business Day,
-------------------------------------
Servicer shall calculate the following:
(a) Allocable Funds;
(b) the Class A Invested Amount;
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(c) the Current Carrying Costs, Additional Amounts, and Servicing Fee owed
to any Related Person;
(d) the Net Invested Amount; and
(e) the Base Amount.
On each Business Day during the Revolving Period or the Amortization Period,
Servicer shall also determine whether the Net Invested Amount is greater than,
equal to or less than the Base Amount.
SECTION 4.6 Allocations During Revolving Period. Prior to each
-----------------------------------
Distribution Date or Subsequent Closing Date occurring in the Revolving Period,
Servicer shall allocate the Allocable Funds and amounts in the
Overcollateralization Account to the following purposes, in the priority
indicated (and to the extent of Allocable Funds and amounts in the
Overcollateralization Account available) for the subaccounts:
first, to the Carrying Cost Account until the amount allocated to the
Carrying Cost Account equals the Current Carrying Costs with respect to the
Investor Certificates;
second, if the Net Invested Amount is greater than the Base Amount, to
the Purchase Account in an amount sufficient to reduce the Net Invested
Amount to an amount equal to the Base Amount;
third, to hold in the Master Collection Account the amount necessary
to pay on the next Distribution Date all Additional Amounts payable to the
Holders of the Class A Certificates;
fourth, to the Reserve Account, an amount sufficient to raise the
balance of such account to $1,500,000; and
fifth, to the Purchase Account.
SECTION 4.7 Allocations of Allocable Funds (Other than During the
-----------------------------------------------------
Revolving Period). On each Business Day (i) not falling in the Revolving Period
- -----------------
and (ii) prior to or on the Fully Funded Date, Servicer shall allocate the
Allocable Funds and amounts in the Reserve Account and Overcollateralization
Account to the following purposes, in the priority indicated (and to the extent
of Allocable Funds and amounts in the Reserve Account and Overcollateralization
Account available) for the respective Accounts:
first, to the Carrying Cost Account to the extent that the balance
therein is less than the amount of Current Carrying Costs payable on the
Distribution Date relating to the Calculation Period during which such
Business Day falls;
second, to the Principal Funding Account up to the Invested Amounts
with respect to the Class A Certificates;
14
<PAGE>
third, to hold in the Master Collection Account the amount necessary
to pay on the next Distribution Date all Additional Amounts payable to the
Holders with respect to the Class A Certificates;
fourth, to pay any then-current indemnity obligations of the
Transferor pursuant to this Agreement;
fifth, to pay the outstanding principal and any accrued and unpaid
interest on the Transferor Certificate; and
sixth, the balance, to the Transferor for application in accordance
with Article XII of this Agreement.
-----------
SECTION 4.8 Withdrawals from the Purchase Account. On any Business Day
-------------------------------------
during the Revolving Period on which no Early Amortization Event or Unmatured
Early Amortization Event exists, Servicer may instruct Trustee in writing (a
"Servicer Report") to withdraw funds from the Purchase Account and apply such
funds as Allocable Funds for such Class, including releasing payments to
Transferor to permit it to purchase new Receivables pursuant to the Purchase
Agreement under clause fifth of Section 4.6, so long as the Net Invested Amount
would not exceed the Base Amount after giving effect to such transfer and
application. On the first day of the Amortization Period or an Early
Amortization Period, Servicer shall instruct Trustee to transfer the entire
balance in the Purchase Account subaccount to the Principal Funding Account.
SECTION 4.9 Investment of Funds in Transaction Accounts. On any day
-------------------------------------------
when funds on deposit in any Transaction Account exceed $10,000 (after giving
effect to the allocations of such funds required by this Article IV), and at
----------
such other times as investment is practicable, Trustee, at the direction of
Transferor, shall invest and reinvest monies on deposit in such Transaction
Account (in the name of Trustee) in such Eligible Investments as are specified
in a notice from Transferor, subject to the restrictions set forth hereinafter.
All Eligible Investments made from funds in any Transaction Account, and the
interest, dividends and income received thereon and therefrom and the net
proceeds realized on the sale thereof, shall be deposited in such Transaction
Account. All Eligible Investments in each Transaction Account shall mature not
later than the next succeeding Distribution Date. Trustee may liquidate an
Eligible Investment prior to maturity if such liquidation would not result in a
loss of all or part of the principal portion of such Eligible Investment or if,
prior to the maturity of such Eligible Investment, a default occurs in the
payment of principal, interest or any other amount with respect to such Eligible
Investment. In the absence of negligence of Trustee or willful misconduct by
Trustee, Trustee shall have no liability in connection with investment losses
incurred on Eligible Investments.
SECTION 4.10 Attachment of Transaction Accounts. If Trustee receives
----------------------------------
written notice that any Transaction Account has or will become subject to any
writ, judgment, warrant of attachment, execution or similar process, Trustee
shall (notwithstanding any other provision of the Transaction Documents)
promptly notify Transferor, Servicer and the Certificateholders thereof, and
shall not deposit or transfer funds into such Transaction Account but shall
cause funds otherwise required to be deposited into such Transaction Account to
be held in another account pending distribution of such funds in the manner
required by the Transaction Documents.
15
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ARTICLE V
DISTRIBUTIONS AND REPORTS
SECTION 5.1 Distributions. On each Distribution Date, Trustee shall, in
-------------
accordance with instructions set out in the applicable Monthly Report (following
delivery within the time period required under Section 3.5(c)), distribute first
--------------
to the Class A Holders, at or before 2:00 p.m., New York City time, all accrued
and unpaid interest on the Series 1997-1 Certificates, to the extent funds are
available for such payment in the Carrying Cost Account, and in the event of any
shortfall, first, the Trustee shall be paid its accrued and unpaid fees, and the
Servicer shall be paid any Servicing Fees and Servicing Advances then due and
payable, pro-rata; second, the Holders shall be paid the interest then due and
payable with respect to the Class A Certificates, pro-rata in accordance with
their respective Class Percentages, and third, to the Transferor
Certificateholders, any unpaid current interest. In addition, on each
Distribution Date Trustee shall, in accordance with instructions set out in the
applicable Monthly Report (following delivery within the time period required
under Section 3.5(c) of the Pooling Agreement), distribute to the Holders at or
--------------
before 2:00 p.m., New York City time, the following amounts:
(a) on each Principal Payment Date, all funds deposited in the Principal
Funding Account on or prior to the most recent Cut-Off Date (but in no event in
excess of the Invested Amount) shall be distributed to the Class A Certificate
Holders (subject to any applicable notification period) in reduction of the
Invested Amount (and in the event of any shortfall, such Holders shall be paid
pro-rata to their respective Series Percentages);
(b) if, on the Final Scheduled Payment Date or any Distribution Date
falling in an Early Amortization Period, the Invested Amount is greater than
zero (after giving effect to the distribution required by subsection (a)), then
---------------
an amount equal to the lesser of (i) such remaining Invested Amount and (ii) the
balance of the Carrying Cost Account shall be withdrawn from the Carrying Cost
Account subaccount and distributed in reduction of the Invested Amount (and in
the event of any shortfall, the Holders shall be paid pro-rata to their
respective Series Percentages); and
(d) any Additional Amounts payable with respect to Series 1997-1
Certificates to the extent that funds have been allocated for those Additional
Amounts pursuant to priority third of Section 4.6 (and in the event of any
-----------
shortfall, Additional Amounts shall be paid to the Holders pro-rata to their
respective Series Percentages) in the Master Collection Account.
All distributions pursuant to this Section 5.1 shall be distributed to the
Holders in immediately available funds by wire transfer. Payments received
after 2:00 p.m., New York City time shall be deemed received the following
Business Day.
SECTION 5.2 Payments in Respect of Transferor Certificate. On each day
---------------------------------------------
on which funds are allocated pursuant to Section 4.6 and Section 4.7, Trustee
----------- -----------
shall, in accordance with instructions set out in the applicable Servicer Report
(following delivery required under Section 4.8), distribute to Transferor, in
-----------
respect of the Transferor Certificate, at or before 2:00 p.m., New York City
time, all funds allocated for that purpose in accordance with that Section. In
addition, after the Invested Amount has been repaid in full and all interest and
Additional Amounts owed to the Holders have been paid, any additional funds on
deposit in the Carrying Cost Account, the Purchase Account, the Principal
Funding Account or the Overcollateralization Account shall similarly be paid to
Transferor, at or before 2:00 p.m., New York City time, in respect of the
Transferor Certificate. Any
16
<PAGE>
funds otherwise payable to the Transferor pursuant to this Section 5.2 shall be
-----------
subject to any then-current indemnity obligations of the Transferor pursuant to
this Agreement.
SECTION 5.3 Weekly Reports and Monthly Reports. Each Monthly Report
----------------------------------
shall be substantially in the applicable form set out in Exhibit C or in such
---------
other form as may be satisfactory to Servicer and Trustee and consistent with
the terms of this Agreement. Copies of each Monthly Report shall be provided
free of charge by Servicer to the Holders of Certificates.
SECTION 5.4 Annual Tax Information. On or before January 30 of each
----------------------
calendar year, beginning with calendar year 1998, Trustee shall furnish or cause
to be furnished to each Person who at any time during the preceding calendar
year was a Holder the information and forms for the preceding calendar year, or
the applicable portion thereof during which the Person was a Holder, as is
required to be provided by an issuer of indebtedness under the Internal Revenue
Code to the holders of the issuer's indebtedness and such other customary
information as is necessary to enable such Holders to prepare their federal
income tax returns, and file applicable copies with Governmental Authorities as
required by law.
SECTION 5.5 Periodic Perfection Certificate. On or before March 15 of
-------------------------------
each calendar year, beginning with calendar year 1998, Transferor shall furnish
or cause to be furnished to Trustee and the Holders an Officer's Certificate
setting forth a list of all changes in (a) the name, identity or corporate
structure of Transferor and (b) the chief executive office of Transferor (or in
the place of business of Transferor that has only one place of business) that
have taken place since the date of the Officer's Certificate most recently
delivered pursuant to this Section 5.5 (or since the Closing Date, in the case
-----------
of the first such Officer's Certificate to be delivered), or indicating that no
such events have taken place, and stating in each case what filings of UCC
financing statements, or amendments thereto, relating to the Transaction
Documents have been made in connection with each such event (identifying the
date and filing index numbers for each). Any financing statement identified in
such an Officer's Certificate delivered to Trustee shall be deemed to have been
identified to Trustee in writing for purposes of subsection 11.1(c). If any
------------------
such new UCC financing statements are filed, Trustee shall be named as secured
party (in the case of any filing against Transferor) or assignee of the secured
party (in the case of any filing against Seller).
ARTICLE VI
THE CERTIFICATES
SECTION 6.1 The Certificates. The Investor Certificates shall be
----------------
substantially in the form of Exhibit B, and the Transferor Certificate shall be
---------
substantially in the form of Exhibit E. Upon issuance, all Certificates shall
---------
be executed and delivered by Transferor to Trustee for authentication and
redelivery as provided in Sections 6.2 and 6.10. Investor Certificates shall be
------------ ----
issued in minimum denominations of $500,000 and in integral multiples of
$100,000 and shall not be subdivided for resale into Certificates smaller than a
Certificate, the initial offering price for which would have been at least
$500,000.
Notwithstanding any other provision of this Agreement, no transfer,
assignment or other conveyance of, or sale of any interest in a Certificate
shall be made unless, after giving effect thereto, there shall be no more than
100 Private Holders of Subject Instruments, as reasonably determined by the
Transferor. Any attempted transfer, assignment, conveyance, participation or
subdivision in
17
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contravention of the preceding restrictions, as reasonably determined by the
Transferor, shall be void ab initio and the purported transferor, seller or
subdivider of such Certificate shall continue to be treated as the
Certificateholder of any such Certificate (or interest therein) for all purposes
of this Agreement.
Each Certificate shall be executed by manual or facsimile signature on
behalf of Transferor by its President or any Vice President or by any attorney-
in-fact duly authorized to execute the Certificate on behalf of any such
officer. The Certificates shall be authenticated on behalf of the Trust by
manual signature of a duly authorized signatory of Trustee. Certificates
bearing the manual or facsimile signature of the individual who was, at the time
when the signature was affixed, authorized to sign on behalf of Transferor or
the Trust (as applicable) shall be valid and binding, notwithstanding that the
individuals or any of them ceased to be so authorized prior to the
authentication and delivery of the Certificates or does not hold such office on
the date of issuance of such Certificates. No Certificates shall be entitled to
any benefit under this Agreement, or be valid for any purpose, unless there
appears on the Certificate a certificate of authentication substantially in the
form provided for herein executed by or on behalf of Trustee by the manual
signature of a duly authorized signatory, and the certificate of authentication
upon any Certificate shall be conclusive evidence, and the only evidence, that
the Certificate has been duly authenticated and delivered hereunder and is
entitled to the benefits of this Agreement. All Certificates shall be dated the
date of their authentication.
SECTION 6.2 Authentication of Certificates. Contemporaneously with the
------------------------------
initial assignment and transfer of Receivables and other Transferred Assets to
the Trust, Trustee shall authenticate and deliver the Transferor Certificate to
Transferor. On each Issuance Date, upon the order of Transferor, Trustee shall
authenticate and deliver to Transferor the Series of Certificates that are to be
issued originally on such Issuance Date, provided that no new Certificates may
be issued after the Closing Date (except pursuant to Sections 6.3 and 6.4)
--------------------
without the consent of the Required Person.
SECTION 6.3 Registration of Transfer and Exchange of Certificates.
-----------------------------------------------------
(a) Trustee, as agent for Transferor, shall keep, or shall cause to be
kept, at the office or agency to be maintained in accordance with the provisions
of Section 11.16, a register in written form or capable of being converted into
-------------
written form within a reasonable time (the "Certificate Register") in which,
subject to such reasonable regulations as it may prescribe, a transfer agent and
registrar (which may be Trustee) (the "Transfer Agent and Registrar") shall
provide for the registration of the Certificates, transfers and exchanges of the
Certificates and the allocation of payments as herein provided. Transferor
hereby appoints Trustee as the initial Transfer Agent and Registrar.
Transferor, or Trustee as agent for Transferor, may revoke the appointment
as Transfer Agent and Registrar and remove the then-acting Transfer Agent and
Registrar if Trustee or Transferor (as applicable) determines in its sole
discretion that the then-acting Transfer Agent and Registrar has failed to
perform its obligations under this Agreement in any material respect. The then-
acting Transfer Agent and Registrar shall be permitted to resign as Transfer
Agent and Registrar upon 30 days' prior written notice to Trustee, Transferor,
Servicer and the Required Person; provided that such resignation shall not be
effective and the then-acting Transfer Agent and Registrar shall continue to
perform its duties as Transfer Agent and Registrar until Trustee has appointed a
successor Transfer Agent and Registrar reasonably acceptable to Transferor and
the Person so appointed has given Trustee written notice that it accepts the
appointment. The provisions of Sections 11.1 through 11.5
------------- ----
18
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shall apply to the Transfer Agent and Registrar as if all references to
"Trustee" in the applicable provisions of Sections 11.1 through 11.5 were
------------- ----
references to the Transfer Agent and Registrar.
It is intended that the registration of Certificates that is described in
this Section comply with the registration requirements contained in Section 163
of the Internal Revenue Code.
(b) No transfer of all or any part of the Transferor Certificate shall be
made unless (i) Transferor shall have given Trustee and the Required Person
prior written notice of the proposed transfer, (ii) Transferor shall have
delivered to Trustee and the Required Person a Tax Opinion.
(c) Subject to the requirements of subsection (e), if applicable, having
--------------
been fulfilled, upon surrender for registration of transfer of any Certificate,
and, in the case of Investor Certificates, at any office or agency of the
Transfer Agent and Registrar maintained for such purpose, Transferor shall
execute, and Trustee shall authenticate and deliver, in the name of the
designated transferee or transferees, one or more new Certificates of the
appropriate class and Series that are in authorized denominations of like
aggregate fractional interest in the related Series Interest that bear numbers
that are not contemporaneously outstanding.
At the option of an Investor Certificateholder, its Investor Certificates
may be exchanged for other Investor Certificates of the same class and Series
(and bearing the same interest rate as the Investor Certificate surrendered for
registration of exchange) of authorized denominations of like aggregate
fractional interests and bearing numbers that are not contemporaneously
outstanding, upon surrender of the Investor Certificates to be exchanged at any
such office or agency. Whenever any Investor Certificates are so surrendered
for exchange, Transferor shall execute, and Trustee shall authenticate and
deliver, the appropriate number of Investor Certificates of the tenor and
denomination that the Investor Certificateholder making the exchange is entitled
to receive. Every Investor Certificate presented or surrendered for
registration of transfer or exchange shall be accompanied by a written
instrument of transfer in a form satisfactory to Trustee or the Transfer Agent
and Registrar duly executed by the Certificateholder thereof or such
Certificateholder's attorney-in-fact duly authorized in a writing delivered to
the Transfer Agent and Registrar.
No service charge shall be made for any registration of transfer or
exchange of Certificates, but the Transfer Agent and Registrar may require the
Certificateholder to cover any tax or governmental charge that may be imposed in
connection with any transfer or exchange of Investor Certificates.
All Certificates surrendered for registration of transfer and exchange
shall be canceled and disposed of in a manner satisfactory to Trustee.
The Investor Certificateholders may provide notice to Trustee as to whom
and in what manner payment should be made in respect of the Investor
Certificates held by such Investor Certificateholders and Trustee shall make
payment of amounts to which such Investor Certificateholder is entitled in such
manner.
(d) Certificates may be surrendered for registration of transfer or
exchange at the office of the Transfer Agent and Registrar designated in Section
-------
13.5.
- ----
19
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(e) Certificateholders holding Certificates shall not sell, transfer or
otherwise dispose of the Certificates unless the sale, transfer or disposition
is being made pursuant to an exemption from the registration requirements of the
Securities Act and applicable state securities laws and, prior to the proposed
sale, transfer or disposition, the Certificateholder and the proposed transferee
each provide Trustee and Transferor with (i) a Rule 144A Investor Letter in the
form attached to the Certificate Purchase Agreement as Exhibit B or (ii)
---------
representations and, if requested by Trustee or Transferor, an Opinion of
Counsel concerning the proposed sale, transfer or disposition and the
availability of the exemption.
(f) No transfer of a Certificate shall be made unless Trustee and the
Transfer Agent and Registrar shall have received either (i) a representation
letter from the proposed transferee of such Certificate to the effect that such
proposed transferee is not an employee benefit plan subject to the fiduciary
responsibility provisions of ERISA, or Section 4975 of the Internal Revenue
Code, or a Person acting on behalf of any such plan or using the assets of any
such plan or if the proposed transferee is an insurance company, a
representation that the proposed transferee is an insurance company which is
purchasing such certificates with funds contained in an "insurance company
general account" (as such term is defined in section v(e) of prohibited
transaction class exemption 95-60 ("ptce 95-60")) and that the purchase and
holding of such certificates are covered under ptce 95-60, which representation
letter shall not be an expense of the Trust, Trustee, the Transfer Agent and
Registrar, Servicer or the Transferor, or (ii) in the case of any such
certificate presented for registration in the name of an employee benefit plan
subject to the fiduciary responsibility provisions of ERISA, or Section 4975 of
the Internal Revenue Code (or comparable provisions of any subsequent
enactments), or a trustee of any such plan or any other Person who is using the
assets of any such plan to effect such acquisition, an opinion of counsel, in
form and substance reasonably satisfactory to, and addressed and delivered to,
Trustee, the Transfer Agent and Registrar and the Transferor, to the effect that
the purchase or holding of such Certificate will not result in the assets of the
Trust estate being deemed to be "plan assets" and subject to the fiduciary
responsibility provisions of ERISA or the prohibited transaction provisions of
the Internal Revenue Code, will not constitute or result in a prohibited
transaction within the meaning of Section 406 or Section 407 of ERISA or Section
4975 of the Internal Revenue Code, and will not subject the Trust, Trustee, the
Transfer Agent and Registrar, Servicer or the Transferor to any obligation or
liability (including obligations or liability under ERISA or Section 4975 of the
Internal Revenue Code) in addition to those explicitly undertaken in this Trust
Agreement which opinion of counsel shall not be an expense of the Trust,
Trustee, the Transfer Agent and Registrar, Servicer or the Transferor.
SECTION 6.4 Mutilated, Destroyed, Lost or Stolen Certificates. If (a)
-------------------------------------------------
any mutilated Certificate is surrendered to the Transfer Agent and Registrar, or
the Transfer Agent and Registrar receives evidence to its satisfaction of the
destruction, loss or theft of any Certificate and (b) there is delivered to the
Transfer Agent and Registrar and Trustee such security or indemnity as may be
required by them and Transferor to hold each of them, the Trust and Transferor
harmless, then, in the absence of notice to Trustee that such Certificate has
been acquired by a bona fide purchaser, Transferor shall execute and, upon the
request of Transferor, Trustee shall authenticate and deliver, in exchange for
or in lieu of any such mutilated, destroyed, lost or stolen Certificate, a new
Certificate of like tenor, terms and principal amount and bearing a number that
is not contemporaneously outstanding. In connection with the issuance of any
new Certificate under this section, Trustee or the Transfer Agent and Registrar
may require the payment by the Certificateholder of a sum sufficient to cover
any tax or other governmental charge that may be imposed in relation thereto and
any other expenses (including the reasonable fees and expenses of Trustee and
Transfer Agent and Registrar)
20
<PAGE>
connected therewith. Any duplicate Certificate issued pursuant to this section
shall constitute conclusive and indefeasible evidence of ownership of an
interest in the Trust, as if originally issued, whether or not the lost, stolen
or destroyed Certificate shall be enforceable by anyone, and shall be entitled
to all the benefits of this Agreement equally and proportionately with any and
all Certificates of the same class and Series that are duly issued hereunder.
SECTION 6.5 Persons Deemed Owners. Prior to due presentation of a
---------------------
Certificate for registration of transfer, Transferor, Trustee, Servicer, the
Paying Agent, the Transfer Agent and Registrar and any agent of any of them may
treat the Person in whose name any Certificate is registered as the owner of
such Certificate for the purpose of receiving distributions pursuant to Article
-------
V and for all other purposes whatsoever, and none of Transferor, Trustee,
- -
Servicer, the Paying Agent, the Transfer Agent and Registrar or any agent of any
of them shall be affected by any notice to the contrary; provided that, in
determining whether the Holders of the requisite principal amount or stated
amount (as applicable) of Certificates have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Certificates
owned by Transferor, Servicer or any Affiliate thereof shall be disregarded and
deemed not to be outstanding, except that, in determining whether Trustee shall
be protected in relying upon any such request, demand, authorization, direction,
notice, consent or waiver, only Certificates that Trustee knows to be so owned
shall be so disregarded. Certificates so owned that have been pledged in good
faith shall not be disregarded and may be regarded as outstanding if the pledgee
establishes to the satisfaction of Trustee the pledgee's right so to act with
respect to such Certificates and that the pledgee is not Transferor, Servicer or
an Affiliate thereof.
SECTION 6.6 Appointment of Paying Agent. The Paying Agent initially
---------------------------
shall be Trustee. The Paying Agent shall make distributions to
Certificateholders pursuant to this Agreement and report the amounts of the
distributions to Trustee. Any Paying Agent shall have the revocable power to
withdraw funds from the Transaction Accounts for the purpose of making the
distributions. Trustee or, at any time when Trustee is also the Paying Agent,
Servicer may revoke such power of the Paying Agent and remove the Paying Agent
if Trustee or Servicer (as applicable) determines in its sole discretion that
the Paying Agent shall have failed to perform its obligations under this
Agreement in any material respect. The Paying Agent shall be permitted to
resign as Paying Agent upon 30 days' prior written notice to Trustee,
Transferor, Servicer and the Investor Certificateholders. Any resignation or
removal of the Paying Agent, and appointment of a successor Paying Agent, shall
not become effective until the appointment has been accepted by the successor
Paying Agent. If no successor Paying Agent shall have been appointed and shall
have accepted appointment within 30 days after the giving of the notice of
resignation, the resigning Paying Agent may petition any court of competent
jurisdiction to appoint a successor Paying Agent. In the event that Trustee
shall no longer be the Paying Agent, Trustee shall appoint a successor Paying
Agent (which shall be a bank or trust company) reasonably acceptable to the
Required Person, which appointment shall be effective on the date on which the
Person so appointed gives Certificateholders written notice that it accepts the
appointment and on which the Required Person gives written consent to such
appointment. Trustee shall cause the successor Paying Agent or any additional
Paying Agent appointed by Trustee to execute and deliver to Trustee an
instrument in which it shall agree with Trustee that, as Paying Agent, it will
hold all sums, if any, held for payment to the Certificateholders in trust for
the benefit of the Certificateholders entitled thereto until the sums shall be
paid to the Certificateholders. The Paying Agent shall return all unclaimed
funds to Trustee, and upon removal of a Paying Agent such Paying Agent shall
also return all funds in its possession to
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Trustee. The provisions of Sections 11.1 through 11.5 shall apply to the Paying
------------- ----
Agent as if all references in the applicable provisions thereof to "Trustee"
were references to the Paying Agent.
SECTION 6.7 Access to List of Certificateholders' Names and Addresses.
---------------------------------------------------------
Trustee will furnish or cause to be furnished by the Transfer Agent and
Registrar to Transferor, Servicer, Seller or the Paying Agent, within two
Business Days after receipt by Trustee of a written request therefor, a list in
the form the requesting Person may reasonably require of the names and addresses
of the Certificateholders as of the most recent Distribution Date. If any
Holder or group of Holders of Investor Certificates in any Series evidencing not
less than 10% of the aggregate unpaid principal amount of the Series (the
"Applicant") applies in writing to Trustee, and the application states that the
Applicant desires to communicate with other Certificateholders with respect to
their rights under this Agreement Certificates and is accompanied by a copy of
the communication that the Applicant proposes to transmit, then Trustee, after
having been adequately indemnified by the Applicant for its costs and expenses,
shall afford or shall cause the Transfer Agent and Registrar to afford the
Applicant access during normal business hours to the most recent list of
Certificateholders held by Trustee, within five Business Days after the receipt
of the application and indemnification. The list shall be as of a date no more
than 45 days prior to the date of receipt of the Applicant's request.
Every Certificateholder, by receiving and holding a Certificate, agrees
with Trustee that neither Trustee, the Transfer Agent and Registrar, Transferor,
Servicer, Seller nor any of their respective agents shall be held accountable by
reason of the disclosure of any information as to the names and addresses of the
Certificateholders hereunder, regardless of the sources from which the
information was derived.
SECTION 6.8 Authenticating Agent.
--------------------
(a) Trustee may appoint one or more authenticating agents with respect to
the Certificates that shall be authorized to act on behalf of Trustee in
authenticating the Certificates in connection with the issuance, delivery,
registration of transfer, exchange or repayment of the Certificates. Either
Trustee or the authenticating agent, if any, then appointed and acting on behalf
of Trustee shall authenticate the Certificates. Whenever reference is made in
this Agreement to the authentication of Certificates by Trustee or Trustee's
certificate of authentication, such reference shall be deemed to include
authentication on behalf of Trustee by an authenticating agent and a certificate
of authentication executed on behalf of Trustee by an authenticating agent.
Each authenticating agent must be acceptable to Transferor.
(b) Any institution succeeding to the corporate agency business of an
authenticating agent shall continue to be an authenticating agent without the
execution or filing of any document or any further act on the part of Trustee,
the authenticating agent or any other Person.
(c) An authenticating agent may at any time resign by giving written notice
of resignation to Trustee and Transferor. Trustee may at any time terminate the
agency of an authenticating agent by giving notice of termination to the
authenticating agent and Transferor. Upon receiving a notice of resignation or
upon a termination, or in case at any time an authenticating agent shall cease
to be acceptable to Trustee or Transferor, Trustee may promptly appoint a
successor authenticating agent. Any successor authenticating agent, upon
acceptance of its appointment, shall become vested with all the rights, powers
and duties of its predecessor, with like effect as if originally named as an
22
<PAGE>
authenticating agent. No successor authenticating agent shall be appointed
unless acceptable to Trustee and Transferor.
(d) Trustee shall, from its own funds, pay to each authenticating agent (if
any), reasonable compensation from time to time for services performed under
this section.
(e) The provisions of Sections 11.1-11.5 shall be applicable to any
------------------
authenticating agent as if the references in the applicable provisions thereof
to "Trustee" were references to the authenticating agent.
(f) Pursuant to an appointment made under this section, the Certificates
may have endorsed thereon, in lieu of Trustee's certificate of authentication,
an alternate certificate of authentication in substantially the following form:
"This is one of the Certificates described in the Pooling and
Servicing Agreement dated as of _______________, 199_.
____________________________, as Trustee
By: ___________________________________________________
as Authenticating Agent
for Trustee,
By: ___________________________________________________
Authorized Officer."
SECTION 6.9 Tax Treatment. It is the intent of Transferor and the
-------------
Investor Certificateholders that, for purposes of Federal, state and local
income and franchise taxes and other taxes measured by or imposed on income,
(i) the Investor Certificates will be treated as evidence of indebtedness
secured by the Transferred Assets, (ii) income and gains earned and expenses and
losses suffered with respect to the Receivables and Transferred Assets and
through investment of funds in the Transaction Accounts shall be treated as
income, gain expense and loss of Transferor, and (iii) the Trust will not be
characterized as an association or publicly traded partnership taxable as a
corporation. Transferor, by entering into this Agreement, and each Investor
Certificateholder, by its acceptance of its Investor Certificate, agrees to
treat the Investor Certificates as indebtedness for purposes of Federal, state
and local income and franchise taxes and any other taxes measured by or imposed
on income. The provisions of this Agreement and all related Transaction
Documents shall be construed to further these intentions of the parties. In
accordance with the foregoing, Transferor agrees that it will report its income
for purposes of Federal, state and local income or franchise taxes, and any
other taxes measured by or imposed on income, on the basis that it is the owner
of the Purchased Assets and related investments in the Transaction Accounts.
Except to the extent otherwise required by applicable law or any Governmental
Authority, Trustee hereby agrees to treat the Trust as a security device only,
and shall not file tax returns or obtain an employer identification number on
behalf of the Trust.
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<PAGE>
SECTION 6.10 Issuance of Additional Series of Certificates.
---------------------------------------------
(a) Transferor may from time to time issue and direct Trustee to
authenticate one or more classes of any newly issued Series of Investor
Certificates (an "Issuance") if the Required Person shall have given its prior
written consent.
(b) Transferor may direct Trustee to authenticate an Issuance by notifying
Trustee, in writing, at least five Business Days (or such shorter period as
shall be acceptable to Trustee) in advance (an "Issuance Notice") of the date
upon which the Issuance is to occur (an "Issuance Date"). Any Issuance Notice
shall state the designation of any Series to be issued on the Issuance Date and,
with respect to each class or Series: (i) its initial invested amount (or the
method for calculating the initial invested amount) and (ii) its interest rate
(or the method for allocating interest payments or other cash flows to the
Series), if any, with respect to the Series.
(c) On the Issuance Date, Transferor shall deliver to Trustee for
authentication under Section 6.2, and Trustee shall authenticate and deliver any
-----------
such class or classes of Series of Investor Certificates only upon delivery to
it (and, in the case of item (iv) below the Required Person) of the following:
(i) a Supplement satisfying the criteria set forth in subsection
----------
(d) and in form reasonably satisfactory to Trustee executed by Transferor
---
and Servicer and specifying the principal terms of the Series;
(ii) a Tax Opinion for each outstanding Series of Investor
Certificates with respect to such Issuance;
(iii) for any Issuance occurring after the Closing Date, an
Officer's Certificate of Transferor that on the Issuance Date, after giving
effect to the Issuance (and the repayment, on the date of the Issuance Date,
of any existing Investor Certificates with funds (including proceeds of sale
of the new Series) on deposit in the Principal Funding Account), any
requirements set out in the Supplement with respect to any then outstanding
Series with respect to the amount of Certificates that may not, by their
terms, be transferred has been satisfied;
(iv) an Officer's Certificate of Servicer stating that no Early
Amortization Event or Unmatured Early Amortization Event has occurred and is
continuing and that there is not a substantial likelihood that the Issuance
would result in an Early Amortization Event or an Unmatured Early
Amortization Event at any time in the future; and
(v) any other documents, certificates and Opinions of Counsel as
may be required by the applicable Supplement.
Upon satisfaction or waiver of the conditions for any Issuance, Trustee shall
cancel any Investor Certificates that are to be cancelled in connection with
such Issuance and issue, as provided above, the new Series of Investor
Certificates dated the Issuance Date. Any such Series of Investor Certificates
shall be substantially in the form specified in the related Supplement and shall
bear, upon its face, the designation for the Series to which it belongs, as
selected by Transferor. There is no limit to the number of Issuances that may
be made under this Agreement.
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<PAGE>
(d) In conjunction with an Issuance, the parties hereto shall execute a
Supplement, which shall specify the relevant terms with respect to any newly
issued Series of Investor Certificates, which may include: (i) its name or
designation, (ii) the initial invested amount or the method of calculating the
initial invested amount, (iii) the applicable interest rate (or formula for the
determination thereof), (iv) the Issuance Date, (v) the rating agency or
agencies rating the Series, if any, (vi) the interest payment date or dates and
the date or dates from which interest shall accrue, (vii) the method of
allocating Collections with respect to Receivables for the Series and, if
applicable, with respect to any paired Series and the method by which the
principal amount of Investor Certificates of the Series shall amortize or accrue
and the method for allocating write-offs, (viii) the names of any accounts to be
used by the Series and the terms governing the operation of any such account,
(ix) the base rate applicable to the Series, (x) the terms on which the
Certificates of the Series may be repurchased or remarketed to other investors,
(xi) any deposit into any account provided for the Series, (xii) the number of
classes of the Series, and if more than one class, the rights and priorities of
each class, (xiii) whether any fees, breakage payments or early termination
payments will be included in the funds available to be paid for the Series,
(xiv) the subordination of the Series to any other Series, (xv) whether the
Series will be a part of a group or subject to being paired with any other
Series, (xvi) whether the Series will be prefunded and (xvii) any other relevant
terms of the Series. The terms of the Supplement may modify or amend the terms
of this Agreement or the Purchase Agreement (including the related definitions)
solely as applied to the new Series.
(e) Except as specified in any Supplement for the related Series, all
Investor Certificates of any Series shall rank pari passu and be equally and
ratably entitled as provided herein to the benefits hereof without preference,
priority or distinction on account of the actual time or times of authentication
and delivery, all in accordance with the terms and provisions of this Agreement
and the related Supplement.
SECTION 6.11 Optional Redemption of Investor Interests. On any
-----------------------------------------
Distribution Date occurring during an Early Amortization Period with respect to
the Series 1997-1 Certificates on or after the date that the Invested Amount is
reduced to ten percent or less of the sum of the initial Stated Amounts for the
Certificates, and provided the Certificates were fully funded to their Stated
Amounts, Transferor shall have the option to redeem the Series 1997-1 Series
Interest.
SECTION 6.12 Rule 144A. So long as any of the Series 1997-1
---------
Certificates are "restricted securities" within the meaning of Rule 144(a)(3)
under the Securities Act, Servicer shall, unless it becomes subject to and
complies with the reporting requirements of Section 13 or 15(d) of the
---------- -----
Securities Exchange Act of 1934, as amended, or Rule 12g3-2(b) thereunder,
provide to any Holder of such restricted securities, or to any prospective
purchaser of such restricted securities designated by a Holder, upon the request
of such Holder or prospective purchaser, any information required to be provided
by Rule 144A(d)(4) under the Act.
SECTION 6.13 Optional Call. Upon giving 30 days' prior written notice
-------------
to Trustee, Transferor shall have the right to repurchase all, but not less than
all of the Purchased Assets for a repurchase price equal to the quarter of: (a)
the then outstanding principal amount of the applicable Receivables or (b) the
fair market value of the Purchased Assets, plus, in either case, all accrued and
unpaid interest with respect to the Certificates.
25
<PAGE>
ARTICLE VII
TRANSFEROR
SECTION 7.1 Representations and Warranties of Transferor Relating to
--------------------------------------------------------
Transferor and the Transaction Documents. On the date hereof, on the date each
- ----------------------------------------
funding is requested from Investor Certificateholders under the Certificate
Purchase Agreements, and on each Issuance Date, Transferor hereby represents and
warrants for the benefit of Trustee and the Certificateholders that:
(a) Organization and Good Standing. Transferor is a corporation duly
organized and validly existing and in good standing under the laws of its
jurisdiction of organization and has all necessary corporate power and authority
to acquire, own and transfer the Receivables and the Related Transferred Assets.
(b) Due Qualification. Transferor is duly qualified to do business and is
in good standing as a corporation (or is exempt from such requirements), and has
obtained all necessary licenses and approvals, in all jurisdictions in which the
ownership or lease of property or the conduct of its business requires
qualification, licenses or approvals.
(c) Power and Authority. Transferor has all necessary organizational power
and authority to execute, deliver and perform its obligations under this
Agreement and the other Transaction Documents to which it is a party.
(d) Binding Obligations. This Agreement constitutes, and each other
Transaction Document to which Transferor is a party when executed and delivered
will constitute, a legal, valid and binding obligation of Transferor,
enforceable against it in accordance with its terms, except as enforceability
may be limited by bankruptcy, insolvency, reorganization or other similar laws
affecting the enforcement of creditors' rights generally and by general
principles of equity, regardless of whether enforceability is considered in a
proceeding in equity or at law.
(e) Authorization, No Conflict or Violation. The execution, delivery and
performance of, and the consummation of the transactions contemplated by, this
Agreement and the other Transaction Documents to be signed by Transferor and the
fulfillment of the terms hereof and thereof have been duly authorized by all
necessary action and will not (i) conflict with, violate, result in any breach
of any of the terms and provisions of, or constitute (with or without notice or
lapse of time or both) a default under, (A) its articles of incorporation or
bylaws or (B) any indenture, loan agreement, mortgage, deed of trust or other
material agreement or instrument to which Transferor is a party or by which it
or any of its properties is bound, (ii) result in the creation or imposition of
any Adverse Claim upon any of its properties pursuant to the terms of any such
contract, indenture, loan agreement, mortgage, deed of trust, or other agreement
or instrument, other than this Agreement and the other Transaction Documents, or
(iii) conflict with or violate any federal, state, local or foreign law or any
decision, decree, order, rule or regulation applicable to it or any of its
properties of any court or of any federal, state, local or foreign regulatory
body, administrative agency or other governmental instrumentality having
jurisdiction over it or any of its properties.
(f) Litigation and Other Proceedings. (i) There is no action, suit or
proceeding pending or, to the best knowledge of Transferor, threatened against
it before any court, regulatory body, arbitrator, administrative agency or other
tribunal or governmental instrumentality and (ii) it is not subject to any
order, judgment, decree, injunction, stipulation or consent order of or with any
court
26
<PAGE>
or other government authority that, in the case of clauses (i) and (ii), (A)
----------- ----
asserts the invalidity of this Agreement or any other Transaction Document, (B)
seeks to prevent the transfer of any Receivables or Related Transferred Assets
to the Trust, the issuance of the Certificates or the consummation of any of the
transactions contemplated by this Agreement or any other Transaction Document,
(C) seeks any determination or ruling that would materially and adversely affect
the performance by Transferor of its obligations under this Agreement or any
other Transaction Document or the validity or enforceability of this Agreement
or any other Transaction Document, (D) seeks to affect materially and adversely
the income tax attributes of the transfers hereunder or the Trust under the
United States Federal income tax system or any state income tax system or (E)
individually or in the aggregate for all such actions, suits, proceedings and
investigations has, or has a reasonable likelihood of having, a Material Adverse
Effect with respect to Transferor.
(g) Third Party Approvals. All authorizations, consents, orders and
approvals of, or other action by, any Governmental Authority or other third
party that are required to be obtained by Transferor, and all notices to and
filings with any Governmental Authority or other third party, that are required
to be made by it, in the case of each of the foregoing in connection with the
transfer of Receivables and Related Transferred Assets to the Trust or the
execution, delivery and performance by it of this Agreement and any other
Transaction Documents to which it is a party and the consummation of the
transactions contemplated by this Agreement, have been obtained or made and are
in full force and effect, except where the failure to obtain or make any such
authorization, consent, order, approval, notice or filing, individually or in
the aggregate for all such failures, does not have, and would not have a
reasonable likelihood of having, a Material Adverse Effect with respect to
Transferor.
(h) Offices. Transferor's principal place of business and chief executive
office is, and since the date of its organization has been, located at the
address set forth under Transferor's signature hereto (or at such other
locations, notified to Servicer and Trustee in accordance with Section 7.2(c),
--------------
in jurisdictions where all action required by Section 7.2(c) has been taken and
------- ------
completed).
(i) Reserved.
(j) Investment Company Act. Transferor is not, and is not controlled by, an
"investment company" registered or required to be registered under the
Investment Company Act of 1940, as amended.
(k) Bulk Sales Act. No transaction contemplated by this Agreement or any
other Transaction Document requires compliance with, or will be subject to
avoidance under, by bulk sales act or similar law.
(l) Margin Regulations. No use of any funds obtained by Transferor under
this Agreement will conflict with or contravene any of Regulations G, T, U and X
promulgated by the Federal Reserve Board from time to time.
(m) Compliance with Applicable Laws. Transferor is in compliance with
requirements of all applicable laws, rules, regulations and orders of all
Governmental Authorities (federal, state, local or foreign, and including
environmental laws), a violation of any of which, individually or in the
aggregate for all such violations, has, or has a reasonable likelihood of
having, a Material Adverse Effect with respect to Transferor.
27
<PAGE>
(n) Taxes. Transferor has filed or caused to be filed all tax returns and
reports required by law to have been filed by it and has paid all taxes,
assessments and governmental charges thereby shown to be owing, except any such
taxes, assessments or charges (i) that are being contested in good faith, (ii)
for which adequate reserves in accordance with GAAP shall have been set aside on
its books and (iii) with respect to which no Adverse Claim, except Permitted
Adverse Claims, has been imposed upon any Receivables or Transferred Assets.
The representations and warranties set forth in this section shall survive
the transfer and assignment of the Receivables and the other Transferred Assets
to the Trust. Upon discovery by Transferor, Servicer or Trustee of a breach of
any of the foregoing representations and warranties, the party discovering the
breach shall give written notice to the other parties to this Agreement within
two Business Days following the discovery.
SECTION 7.2 Covenants of Transferor. So long as any Investor Certificates
-----------------------
remain outstanding, Transferor shall, unless the Required Person shall otherwise
consent in writing:
(a) Compliance with Laws, Etc. Comply in all material respects with all
applicable laws, rules, regulations, judgments, decrees and orders (including
those relating to the Receivables, the Related Transferred Assets, the funds in
the Transaction Accounts and the related Transaction Documents and any other
agreements related thereto), in each case to the extent the failure to comply,
individually or in the aggregate for all such failures, has, or has a reasonable
likelihood of having, a Material Adverse Effect with respect to Transferor.
(b) Preservation of Organizational Existence. Preserve and maintain its
status and existence as a limited liability company, rights, franchises and
privileges in the jurisdiction of its organization, and qualify and remain
qualified in good standing as a foreign limited liability company in each
jurisdiction where the failure to preserve and maintain such existence, rights,
franchises, privileges and qualifications has, or has a reasonable likelihood of
having, a Material Adverse Effect with respect to Transferor.
(c) Location of Offices. Keep its principal place of business and chief
executive office at the address referred to in Section 7.1(h) or, upon not less
--------------
than 30 days' (or such shorter number of days as is acceptable to Servicer and
Trustee) prior written notice given by Transferor to Servicer and Trustee, at
such other location in a jurisdiction where all action required pursuant to
Section 3.10 shall have been taken and completed. Transferor will at all times
- ------------
maintain its principal place of business and chief executive offices within the
United States of America.
(d) Reporting Requirements of Transferor. Furnish to Trustee, Servicer, and
the Investor Certificateholders:
(i) Early Amortization Events. As soon as possible, and in any event
within two Business Days after an Authorized Officer of Transferor has
obtained knowledge of the occurrence of any Early Amortization Event or any
Unmatured Early Amortization Event, a written statement of an Authorized
Officer of Transferor describing the event and the action that Transferor
proposes to take with respect thereto, in each case in reasonable detail,
(ii) Material Adverse Effect. As soon as possible and in any event
within two Business Days after an Authorized Officer of Transferor has
knowledge thereof, written notice
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that describes in reasonable detail any Adverse Claim, other than any
Permitted Adverse Claim, against the Transferred Assets or any other event
or occurrence that, individually or in the aggregate for all such events or
occurrences, has, or has a reasonable likelihood of having, a Material
Adverse Effect with respect to Transferor,
(iii) Proceedings. As soon as possible and in any event within two
Business Days after an Authorized Officer of Transferor has knowledge
thereof, written notice of (A) any litigation, investigation or proceeding
of the type described in Section 7.1(f) not previously disclosed to Trustee
--------------
and (B) any material adverse development that has occurred with respect to
any such previously disclosed litigation, investigation or proceeding,
(iv) Other. Promptly, from time to time, any other information,
documents, records or reports respecting the Receivables or the Related
Transferred Assets or any other information respecting the condition or
operations, financial or otherwise, of Transferor, in each case as Trustee
or a Required Person may from time to time reasonably request in order to
protect the interests of Trustee, the Trust or the Investor
Certificateholders under or as contemplated by this Agreement.
(e) Adverse Claims. Except for any conveyances under the Transaction
Documents, not permit to exist any Adverse Claim (other than Permitted Adverse
Claims) to or in favor of any Person upon or with respect to, or cause to be
filed any financing statement or equivalent document relating to perfection that
covers, any Transferred Asset or any interest therein. Transferor shall defend
the right, title and interest of the Trust in, to and under the Transferred
Assets, whether now existing or hereafter created, against all claims of third
parties claiming through or under Transferor.
(f) Extension or Amendment of Receivables; Change in Underwriting
Guidelines. Not (i) extend, amend or otherwise modify the terms of any
Receivable (except as permitted by the Collections Policy) in a manner that
would have a Material Adverse Effect on the Investor Certificateholders, Trustee
or Servicer or without the prior written consent of the Required Person, or (ii)
permit Seller to make any change in its Collections Policy that would have a
Material Adverse Effect on the Investor Certificateholders; provided that
Transferor or Servicer, as applicable, may change the terms and provisions of
the Credit and Collections Policy if the change is made with the prior written
approval of the Required Person.
(g) Mergers, Acquisitions, Sales, Etc. Not:
(i) (A) be a party to any merger or consolidation, or directly or
indirectly purchase or otherwise acquire all or substantially all of the
assets or any stock of any class of, or any partnership or joint venture
interest in, any other Person, or (B) except pursuant to the Transaction
Documents, directly or indirectly, sell, transfer, assign, convey, lease,
pledge or grant a security interest in, whether in one transaction or in a
series of transactions, the Transferor Certificate or all or any substantial
portion of its assets, or sell or assign with or without recourse any
Receivables or Related Transferred Assets (other than as provided in the
Transaction Documents);
(ii) except as contemplated in the Purchase Agreement in connection with
Transferor's purchases of Receivables and Related Assets from Seller and its
permitted successors, (A) make, incur or suffer to exist an investment in,
equity contribution to, or
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payment obligation in respect of the deferred purchase price of property or
services from, any Person, or (B) make any loan or advance to any Person
other than for reasonable and customary operating expenses; or
(iii) create any direct or indirect Subsidiary, joint venture,
partnership or other entity or otherwise acquire direct or indirect
ownership of any equity interests in any other Person, other than Eligible
Investments held in Transaction Accounts.
(h) Change in Name. Not change its corporate name or the name under or by
which it does business, unless prior to the change in name, Transferor (i) shall
have given Servicer and Trustee 30 days' prior written notice thereof, and (ii)
shall have filed (or shall have caused to be filed) any Public Notices as
Servicer or Trustee determines may be necessary to continue the perfection of
the Trust's interest in the Receivables, the Related Transferred Assets and the
proceeds thereof, and taken and completed all other action required by
Section 3.10.
(i) Amendment of Certificate of Formation; Change in Business. Not amend
its articles of incorporation or bylaws in any material respect, or engage in
any business other than as contemplated by the Transaction Documents; provided,
however, that the Transferor shall provide the Required Person with prior
written notice of any amendment.
(j) Amendments to Purchase Agreement. Not (i) cancel or terminate the
Purchase Agreement or consent to or accept any cancellation or termination
thereof, (ii) amend or otherwise modify any term or condition of the Purchase
Agreement or give any consent, waiver or approval thereunder, (iii) waive any
default under or breach of the Purchase Agreement or (iv) take any other action
under the Purchase Agreement not required by the terms thereof.
(k) Enforcement of Transaction Documents. Perform all its obligations under
and otherwise comply with the Transaction Documents and enforce the covenants
and agreements of Seller in the Purchase Agreement and the other Transaction
Documents to which Transferor is a party, unless instructed otherwise by Trustee
or by Trustee at the direction of the Required Person in connection with the
exercise of Trustee's rights pursuant to its security interest in Transferor's
right, title and interest in, to and under the Transaction Documents to which
Transferor is a party.
(l) Other Indebtedness. Not (i) create, incur or permit to exist any
Indebtedness, Guaranty, or liability, except for (A) other liabilities
specifically permitted to be created, incurred or owed by Transferor pursuant to
or in connection with the Transaction Documents and (B) liabilities for
reasonable and customary operating expenses, or (ii) cause or permit to be
issued for its account any letters of credit or bankers' acceptances.
(m) Separate Organization Existence. Take, from and after the Closing Date,
all reasonable steps to maintain its existence as an organization separate and
apart from Servicer, Seller and any other Related Person, Transferor hereby
acknowledging that Trustee and the Investor Certificateholders are, and will be,
entering into the transactions contemplated by the Transaction Documents in
reliance upon Transferor's identity as a legal entity separate from Seller,
Servicer and any other Person. Without limiting the generality of the
foregoing, Transferor shall take such actions as shall be reasonably required in
order that:
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(i) Transferor will not incur any material indirect or overhead
expenses for items shared between Transferor and any Related Person other
than shared items of expenses such as legal, auditing and other
professional services, that will be allocated to the extent practical on
the basis of actual use or the value of services rendered, and otherwise on
a basis reasonably related to the actual use or the value of services
rendered.
(ii) Transferor will account for and manage its liabilities
separately from those of every other Related Person, including payment of
all payroll and administrative expenses and taxes (other than taxes that
are determined or required to be determined on a consolidated or combined
basis) from its own assets.
(iii) Transferor will maintain corporate or company records,
books of account and stationery separate from those of every Related
Person; provided, however, that Transferor's financial statements may be
prepared on a consolidated basis together with the Guarantor and Seller in
accordance with GAAP.
(iv) Transferor's assets will be maintained in a manner that
facilitates their identification and segregation from those of any Related
Person.
(v) Transferor shall not, directly or indirectly, be named and
shall not enter into an agreement to be named as a direct or contingent
beneficiary or loss payee on any insurance policy with respect to any loss
relating to the property of a Related Person.
(vi) Any transaction between Transferor and any Related Person
will be the type of transaction which would be entered into by a prudent
Person in the position of Transferor with a Related Person, and will be on
terms that are at least as favorable as may be obtained from a Person that
is not a Related Person (it being understood and agreed that the
transactions contemplated in the Transaction Documents meet the
requirements of this clause).
(vii) Transferor will not be and will not hold itself out to be
responsible for the debts of any Related Person.
(viii) Transferor will operate, conduct its business and
otherwise act in a manner that is consistent with the factual assumptions
in any Bankruptcy Opinion delivered in connection with the Certificates.
(n) Taxes. File or cause to be filed all Federal, state and local tax
returns that are required to be filed by it and pay or cause to be paid all
taxes shown to be due and payable on such returns or on any assessments received
by it, other than any taxes or assessments, the validity of which are being
contested in good faith by appropriate proceedings and with respect to which
Transferor shall have set aside adequate reserves on its books in accordance
with GAAP and which proceedings do not have, or have a reasonable likelihood of
having, a Material Adverse Effect with respect to Transferor.
The covenants set forth in this section shall survive the transfer and
assignment of the Receivables and the other Transferred Assets to the Trust.
Upon discovery by Transferor, Servicer or Trustee of a breach of any of the
foregoing covenants, the party discovering the breach shall give
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written notice to the other parties to this Agreement within two Business Days
following such discovery.
SECTION 7.3 Indemnification by Transferor. Without limiting any other
-----------------------------
rights which any Indemnified Party may have hereunder or under applicable law,
Transferor hereby agrees to indemnify and hold harmless the Trust, Trustee,
(Servicer, if other than a Related Person) and each Certificateholder and each
of the successors, permitted transferees and assigns of any such Person and all
officers, directors, shareholders, controlling Persons, employees, affiliates
and agents of any of the foregoing (each of the foregoing Persons being
individually called an "Indemnified Party"), forthwith on demand, from and
against any and all damages, losses, claims (whether on account of settlement or
otherwise, and whether or not the relevant Indemnified Party is a party to any
action or proceeding that gives rise to any Indemnified Losses (as defined
below)), judgments, liabilities and related reasonable costs and expenses
(including reasonable attorneys' fees and disbursements) (all of the foregoing
being collectively called "Indemnified Losses") awarded against or incurred by
any of to the extent arising out of or relating to Transferor's performance of,
or failure to perform, any of its obligations under or in connection with this
Agreement, any other Transaction Document or any of the transactions
contemplated herein or therein or the use of proceeds herefrom or therefrom.
Notwithstanding the foregoing (and with respect to clause (b) below,
----------
without prejudice to the rights that Trustee may have pursuant to the other
provisions of this Agreement or the provisions of any of the other Transaction
Documents), in no event shall any Indemnified Party be indemnified against any
Indemnified Losses (a) resulting from gross negligence or willful misconduct on
the part of such Indemnified Party (or the gross negligence or willful
misconduct on the part of any of such Indemnified Party's officers, directors,
employees, affiliates or agents), (b) to the extent the same include Indemnified
Losses in respect of Receivables and reimbursement therefor that would
constitute credit recourse to Transferor for the amount of any Receivable or
Related Transferred Asset not paid by the related Obligor, (c) to the extent
such Indemnified Losses are or result from lost profits or other consequential
damage, or (d) to the extent such Indemnified Losses are or result from taxes
asserted with respect to (i) distributions on the Investor Certificates (other
than any withholding taxes, if and to the extent that (A) such withholding taxes
should have been (but in fact were not) withheld and paid over by the Trust to
the relevant taxing authority, (B) such taxing authority asserts a claim for
such withholding taxes against the Trust or the Transferor, and (C) the assets
of the Trust are insufficient to satisfy such claim at the time a final
determination is made that such withholding taxes are due and payable) and (ii)
federal or other income taxes on or measured by the net income of such
Indemnified Party.
If for any reason the indemnification provided in this Section is
unavailable to an Indemnified Party or is insufficient to hold it harmless, then
Transferor shall contribute to the amount paid by the Indemnified Party as a
result of such loss, claim, damage or liability in such proportion as is
appropriate to reflect not only the relative benefits received by such
Indemnified Party on the one hand and Transferor on the other hand, but also the
relative fault of such Indemnified Party (if any) and Transferor and any other
relevant equitable consideration.
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ARTICLE VIII
SERVICER
SECTION 8.1 Representations and Warranties of Servicer. On the date
------------------------------------------
hereof and on each Issuance Date, Servicer hereby makes, and any Successor
Servicer (other than Trustee automatically appointed as Successor Servicer
pursuant to Section 10.2) also shall be deemed to make by its acceptance of its
appointment hereunder, the following representations and warranties for the
benefit of Trustee and the Certificateholders:
(a) Organization and Good Standing. Servicer is a corporation duly
organized and validly existing and in good standing under the laws of its
jurisdiction of incorporation and has all necessary corporate power and
authority to own its properties and to conduct its business as the properties
presently are owned and as the business presently is conducted.
(b) Due Qualification. Servicer is duly qualified to do business and is in
good standing as a foreign corporation (or is exempt from such requirements),
and has obtained all necessary licenses and approvals, in all jurisdictions in
which the servicing of the Receivables and the Related Transferred Assets as
required by this Agreement requires qualification, licenses or approvals.
(c) Power and Authority. Servicer has all necessary corporate power and
authority to execute, deliver and perform its obligations under this Agreement
and the other Transaction Documents to which it is a party.
(d) Binding Obligations. This Agreement constitutes, and each other
Transaction Document to which Servicer is a party when executed and delivered
will constitute, a legal, valid and binding obligation of Servicer, enforceable
against it in accordance with its terms, except as enforceability may be limited
by bankruptcy, insolvency, reorganization or other similar laws affecting the
enforcement of creditors' rights generally and by general principles of equity,
regardless of whether enforceability is considered in a proceeding in equity or
at law.
(e) Authorization; No Conflict or Violation. The execution and delivery by
Servicer of this Agreement and the other Transaction Documents to which it is a
party, the performance by it of its obligations hereunder and thereunder and the
fulfillment by it of the terms hereof and thereof that are applicable to it have
been duly authorized by all necessary action and will not
(i) conflict with, violate, result in any breach of any of the terms and
provisions of, or constitute (with or without notice or lapse of time or both) a
default under, (A) its articles of incorporation or bylaws or (B) any indenture,
loan agreement, mortgage, deed of trust, or other material agreement or
instrument to which it is a party or by which it or any of its properties is
bound (excluding any such agreement that is terminated on or before the Closing
Date or under which Servicer has obtained all necessary consents) or (ii)
conflict with or violate any federal, state, local or foreign law or any
decision, decree, order, rule or regulation applicable to it or any of its
properties of any court or of any federal, state, local or foreign regulatory
body, administrative agency or other governmental instrumentality having
jurisdiction over it or any of its properties.
(f) Approvals. All authorizations, consents, orders and approvals of, or
other action by, any Governmental Authority that are required to be obtained by
Servicer, and all notices to and filings with any Governmental Authority or
other Person that are required to be made by it, in the case of each of the
foregoing in connection with the execution, delivery and performance by it of
this
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Agreement and any other Transaction Documents to which it is a party and
the consummation of the transactions contemplated by this Agreement, have been
obtained or made and are in full force and effect, except where the failure to
obtain or make such authorization, consent, order, approval, notice or filing,
individually or in the aggregate for all such failures, do not have, or have a
reasonable likelihood of having, a Material Adverse Effect with respect to
Servicer or Transferor.
(g) Litigation and Other Proceedings. (i) There is no action, suit,
proceeding or investigation pending or, to the best knowledge of Servicer,
threatened against it before any court, regulatory body, arbitrator,
administrative agency or other tribunal or governmental instrumentality and (ii)
it is not subject to any order, judgment, decree, injunction, stipulation or
consent order of or with any court or other government authority that, in the
case of clauses (i) and (ii), (A) seeks to affect adversely the income tax
----------- ----
attributes of the transfers hereunder or the Trust under the United States
federal income tax system or any state income tax system or (B) individually or
in the aggregate for all such actions, suits, proceedings and investigations
has, or has a reasonable likelihood of having, a Material Adverse Effect with
respect to Servicer or Transferor.
(h) [RESERVED.]
The representations and warranties set forth in this section shall survive
the transfer and assignment of the Receivables and the other Transferred Assets
to the Trust. Upon discovery by an Authorized Officer of Transferor, Servicer
or Trustee of a breach of any of the foregoing representations and warranties,
the party discovering the breach shall give written notice to the other parties
to this Agreement and the Required Person within two Business Days following the
discovery.
SECTION 8.2 Covenants of Servicer. So long as any Investor Certificates
---------------------
remain outstanding (other than any Investor Certificates payment for which has
been duly provided for in accordance with this Agreement), Servicer shall:
(a) Compliance with Laws, Etc. Maintain in effect all qualifications
required under applicable law in order to service properly the Receivables and
shall comply with all applicable laws, rules, regulations, judgments, decrees
and orders.
(b) Preservation of Corporate Existence. Preserve and maintain its
corporate existence, rights, franchises and privileges in the jurisdiction of
its incorporation, and qualify and remain qualified in good standing as a
foreign corporation in each jurisdiction in which the ownership or lease of
property or the conduct of its business requires such qualification, licenses or
approvals.
(c) Notice. As soon as possible (and in any event within two Business Days
after an Authorized Officer has knowledge thereof), furnish to Transferor,
Trustee and the Investor Certificateholders notice of any of the events
described in clauses (i), (ii) and (iii) of Section 7.2(d).
(d) Location of Offices. Maintain at all times its principal place of
business and chief executive office in the United States of America.
(e) Insurance. If requested by the Purchaser in connection with any
securitization of Receivables, maintain customary errors and omissions and
fidelity insurance coverage in such amounts as shall be requested.
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The covenants set forth in this section shall survive the transfer and
assignment of the Transferred Assets to the Trust. Upon discovery by an
Authorized Officer of Transferor, Servicer or Trustee of a breach of any of the
foregoing covenants, the party discovering the breach shall give written notice
to the other parties to this Agreement and the Required Person within two
Business Days following the discovery.
SECTION 8.3 Merger or Consolidation of or Assumption of the Obligations
-----------------------------------------------------------
of, Servicer. Except for the Permitted Sale, Servicer shall not consolidate
- ------------
with or merge into any other Person or convey, transfer or sell all or
substantially all of its properties and assets to any Person, unless (a)
Servicer is the surviving entity or, if it is not the surviving entity, the
Person formed by the consolidation or into which Servicer is merged or the
Person that acquires by conveyance, transfer or sale all or substantially all of
the properties and assets of Servicer shall be a corporation organized and
existing under the laws of the United States of America or any State thereof or
the District of Columbia and such corporation shall expressly assume, by an
agreement supplemental hereto, executed and delivered to Trustee and in form and
substance satisfactory to Trustee, the performance of every covenant and
obligation of Servicer hereunder and under the other Transaction Documents to
which Servicer is a party, and (b) Servicer shall have delivered to Trustee and
the Required Person an Officer's Certificate stating that the consolidation,
merger, conveyance, transfer or sale and the supplemental agreement comply with
this Section and an Opinion of Counsel stating that the supplemental agreement
is a valid and binding obligation of the surviving entity enforceable against it
in accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditors' rights generally and by general principles of equity.
SECTION 8.4 Indemnification by Servicer. Servicer hereby agrees to
---------------------------
indemnify each Indemnified Party forthwith on demand, from and against any and
all Indemnified Losses awarded against or incurred by any of them that arise out
of or relate to Servicer's performance of, or failure to perform, any of its
obligations under or in connection with any Transaction Document in breach of
the terms of such Transaction Document.
Notwithstanding the foregoing (and with respect to clause (b) below,
----------
without prejudice to the rights that such Indemnified Party may have pursuant to
the other provisions of this Agreement or the provisions of any of the other
Transaction Documents), in no event shall any Indemnified Party be indemnified
against any Indemnified Losses (a) resulting from gross negligence or willful
misconduct on the part of such Indemnified Party (or the gross negligence or
willful misconduct on the part of any of such Indemnified Party's officers,
directors, employees, affiliates or agents), (b) to the extent the same includes
Indemnified Losses in respect of Receivables and reimbursement therefor that
would constitute credit recourse to Servicer for the amount of any Receivable or
Related Transferred Asset not paid by the related Obligor, (c) to the extent
such Indemnified Losses are or result from lost profits or other consequential
damage, or (d) to the extent such Indemnified Losses are or result from taxes
asserted with respect to (i) distributions on the Investor Certificates (other
than any withholding taxes, if and to the extent that (A) such withholding taxes
should have been (but in fact were not) withheld and paid over by the Trust to
the relevant taxing authority, (B) such taxing authority asserts a claim for
such withholding taxes against the Trust or the Servicer, and (C) the assets of
the Trust are insufficient to satisfy such claim at the time a final
determination is made that such withholding taxes are due and payable) and (ii)
federal or other income taxes on or measured by the net income of such
Indemnified Party; provided, that clause (ii) shall not apply to limit the
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Servicer's liability for Indemnified Losses of that nature of the Trust.
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If for any reason the indemnification provided in this section is
unavailable to an Indemnified Party or is insufficient to hold it harmless, then
Servicer shall contribute to the amount paid by such Indemnified Party as a
result of such loss, claim, damage or liability in such proportion as is
appropriate to reflect not only the relative benefits received by such
Indemnified Party on the one hand and Servicer on the other hand, but also the
relative fault of such Indemnified Party (if any) and Servicer and any other
relevant equitable consideration.
SECTION 8.5 Servicer Liability. Servicer shall be liable in accordance
------------------
with this Agreement only to the extent of the obligations specifically
undertaken by Servicer in such capacity herein and as set forth herein.
SECTION 8.6 Limitation on Liability of Servicer and Others. Servicer
----------------------------------------------
shall not be under any obligation to appear in, prosecute or defend any legal
action that is not incidental to its duties to service the Receivables in
accordance with this Agreement that in its reasonable opinion may involve it in
any expense or liability. Servicer may, in its sole discretion, undertake any
legal action relating to the servicing, collection or administration of
Receivables and Related Transferred Assets that it may reasonably deem necessary
or appropriate for the benefit of the Certificateholders with respect to this
Agreement and the rights and duties of the parties hereto and the interests of
the Certificateholders hereunder.
ARTICLE IX
EARLY AMORTIZATION EVENTS; TERMINATION BY SELLER
SECTION 9.1 Early Amortization Events. Each of the following shall
-------------------------
constitute an "Early Amortization Event":
(a) any of the following shall occur;
(i) failure on the part of Seller, Transferor or Servicer to make
any deposit required by the terms of any Transaction Document within two
Business Day after the date the deposit is required to be made, to
repurchase any Receivable when due, or to make any other payment required
by the terms of any Transaction Document on or before five Business Days
after the date such payment is required to be made; or
(ii) failure on the part of Servicer to deliver a Monthly Report
within the time required under Section 3.5(c) of the Pooling Agreement, and
--------------
continuance of such failure for five (5) Business Days after notice of such
failure has been provided to Services; or
(iii) failure on the part of Seller duly to observe or perform
Section 6.1(f), 6.1(h), 6.1(i), 6.1(j), 6.3(a), 6.3(b), 6.3(c), 6.3(e),
-------------- ------ ------ ------ -------------------------------
6.3(f) or 6.3(g) of the Purchase Agreement or failure on the part of
------ ------
Transferor duly to observe or perform Section 7.2(c), 7.2(d), 7.2(e),
-------------------------------
7.2(f), 7.2(h), 7.2(i), 7.2(j), 7.2(k) or 7.2(m) of this Agreement, which
-------------------------------------- ------
failure continues unremedied for a period of 10 days; or
(iv) failure on the part of Seller, Transferor or Servicer duly
to observe or perform any other covenant or agreement set forth in any
Transaction Document, which failure continues unremedied for a period of 30
days; or
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(v) failure of the Trust to pay any amount of interest accrued on any
Investor Certificate on any Distribution Date, for whatever reason; or
(b) any representation or warranty made by Seller in subsection 5.1(d),
------------------
5.1(k), 5.1(n), 5.1(o) or 5.1(r) of the Purchase Agreement or by Transferor in
- ---------------------- ------
subsection 2.4(a)(i), 2.4(a)(ii) or 7.1(i) of the Pooling Agreement shall prove
- -------------------- ---------- ------
to have been incorrect in any material respect when made, and continues to be
incorrect in any material respect for a period of five (5) Business Days, or any
other representation or warranty made by Transferor, Servicer, or Seller in any
Transaction Document shall prove to have been incorrect in any material respect
when made, and continues to be incorrect in any material respect for a period of
30 days;
(c) a Bankruptcy Event shall occur with respect to Transferor, Servicer, or
Seller, or Transferor shall become unable, for any reason, to transfer
Receivables or other Transferred Assets to the Trust in accordance with the
provisions of this Agreement; provided that if, at the time any event that
would, with the passage of time, become a Bankruptcy Event occurs as a result of
a bankruptcy proceeding being filed against Transferor or Seller, then, on and
after the day on which the bankruptcy proceeding is filed until the earlier to
occur of the dismissal of the proceeding and the commencement of the Early
Amortization Period, Transferor shall not purchase Receivables and Related
Assets from Seller or, if Transferor is the subject of the proceeding, transfer
Receivables and Related Transferred Assets to the Trust;
(d) Seller, the Trust or Transferor shall be required to be registered as
an "investment company" under and within the meaning of the Investment Company
Act of 1940, as amended;
(e) after the allocation provided in Section 4.6 clause second, the Net
-----------
Invested Amount exceeds the Base Amount for a period of two or more consecutive
Business Days;
(f) a Servicer Default shall have occurred;
(g) Seller shall cease to own, 100% of the equity interests of Transferor;
(h) the Internal Revenue Service or the PBGC files one or more Tax or ERISA
Liens against the assets of Transferor or Seller which is not removed within 30
days;
(i) the cessation of, or the failure to create, either ownership by the
Trustee in, or a valid first-priority perfected security interest in favor of
Trustee in, the Receivables or in the rights of Transferor under the Purchase
Agreement;
(j) any foreclosure or similar proceeding in respect of any adverse claim
on the Transferor shall have been commenced; or title to Transferor's equity
interests shall pass to the holders of such adverse claim which, after 30 days
has not been dismissed;
(k) Report of Seller's independent accountants contains a "going concern"
opinion;
(l) Seller defaults in any of its material debt instruments that singly or
in the aggregate amount to $50,000 or more, and such default is not cured within
the cure periods specified in the defaulted debt instruments;
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(m) a change in control of Seller occurs other than due to the result of an
initial public offering or a private placement of Seller's common stock occurs;
(n) Seller amends the Credit and Collections Policy in contravention of
Section 6.3(b) of the Purchase and Sale Agreement;
- --------------
(o) the Invested Amount is zero for 180 consecutive days;
(p) While the Guarantee is in effect, Guarantor's stockholders' equity
declines below $20,000,000 as shown by any quarterly or annual financial
statement and thereafter, Seller's stockholder's equity declines below
$20,000,000 calculated in accordance with GAAP on a basis that is not
consolidated with Guarantor, as shown by any quarterly or annual financial
statements;
(q) Seller arranges an alternative facility to finance the Receivables;
(r) Delinquent Receivables held by the Trust are equal to or greater than
5% of the Receivables held by the Trust; or
(s) there is a material breach of the structuring fee side letter with
CSFB.
SECTION 9.2 Early Amortization Period. Immediately upon the
-------------------------
occurrence and continuance of any Early Amortization Event, an Early
Amortization Period shall commence without any notice or other action on the
part of Trustee or the Series 1997-1 Certificateholders.
SECTION 9.3 Remedies. Upon the occurrence of an Early Amortization
--------
Event, Trustee shall have, in addition to all other rights and remedies
available to Trustee under this Agreement or otherwise, (a) the right to apply
Collections as provided herein, and (b) all rights and remedies provided under
all other applicable laws, which rights, in the case of each and all of the
foregoing, shall be cumulative. Trustee shall exercise the rights at the
direction of the Investor Certificateholders pursuant to (and subject to the
limitations specified in) Section 11.13.
-------------
SECTION 9.4 Additional Rights Upon the Occurrence of Certain Events.
-------------------------------------------------------
(a) If a Bankruptcy Event shall occur with respect to Transferor, this
Agreement (other than this Section 9.4) and the Trust shall be deemed to have
-----------
terminated on the day of the Bankruptcy Event. Within seven Business Days of
the date of written notice to Trustee of the Bankruptcy Event, Trustee shall:
(i) publish a notice in an Authorized Newspaper that a Bankruptcy
Event has occurred with respect to Transferor, that the Trust has
terminated, and that Trustee intends to sell, dispose of or otherwise
liquidate the Receivables and the Related Transferred Assets pursuant to
this Agreement in a commercially reasonable manner and on commercially
reasonable terms, which shall include the solicitation of competitive bids
(a "Disposition"), and
(ii) send written notice to the Investor Certificateholders
describing the provisions of this section and requesting each Investor
Certificateholder to advise Trustee in writing whether (A) it wishes Trustee
not to effectuate a Disposition, (B) it refuses to advise Trustee as to the
specific action Trustee shall take or (C) it wishes Trustee to effect a
Disposition.
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If, after 60 days from the day notice pursuant to subsection (a)(i) is first
-----------------
published (the "Publication Date"), Trustee shall not have received the written
instruction described in subsection (a)(ii)(A) from Investor Certificateholders
---------------------
representing at least a majority in interest, Trustee shall instruct Servicer to
effectuate a Disposition, and Servicer shall proceed to consummate a
Disposition. If, however, Holders representing at least a majority of interest
of all Series of Investor Certificates instruct Trustee not to effectuate a
Disposition, the Trust shall be reconstituted and continue pursuant to the terms
of this Agreement.
(b) Notwithstanding the termination of this Agreement and the Trust pursuant
to subsection (a), the proceeds from any Disposition of the Receivables and the
--------------
Related Transferred Assets pursuant to subsection (a) shall be treated as
--------------
Collections on the Receivables and shall be allocated and deposited in
accordance with the provisions of Article IV.
----------
(c) Trustee may appoint an agent or agents to assist with its
responsibilities pursuant to this section with respect to competitive bids.
(d) Transferor or any of its Affiliates (other than Seller) shall be
permitted to bid for the Receivables and the Related Transferred Assets.
Trustee may obtain a prior determination from any bankruptcy trustee, receiver
or liquidator that the terms and manner of any proposed Disposition are
commercially reasonable.
(e) Notwithstanding the termination of this Agreement and the Trust pursuant
to subsection (a), Trustee shall continue to have the rights described in
--------------
Section 9.3 and Article XI, and be subject to direction on terms consistent with
- ----------- ----------
those set out in Section 11.14, pending the completion of any Disposition and/or
-------------
the reconstitution of the Trust.
ARTICLE X
SERVICER DEFAULTS
SECTION 10.1 Servicer Defaults. Any of the following events shall
-----------------
constitute a "Servicer Default":
(a) any failure by Servicer to take any action that it is required to take
in its capacity as Servicer to make any payment, transfer or deposit required by
any Transaction Document or to give instructions or to give notice to Trustee to
make such payment, transfer or deposit, which failure continues unremedied for
three Business Days,
(b) failure on the part of Servicer duly to observe or perform any other
covenants or agreements of Servicer set forth in this Agreement or any other
Transaction Document, which failure continues unremedied for a period of 25
Business Days after the date on which written notice of the failure, requiring
the same to be remedied, shall have been given to Servicer by Trustee, or to
Servicer and Trustee by any Investor Certificateholder,
(c) Servicer shall assign its duties under this Agreement, except as
permitted by Sections 3.1(b) and 8.3,
--------------- ---
39
<PAGE>
(d) any representation, warranty or certification made by Servicer in any
Transaction Document or in any certificate or other document or instrument
delivered pursuant to any Transaction Document shall prove to have been
incorrect when made or delivered, and continues to be incorrect in any material
respect for a period of 15 Business Days after the date on which written notice
of such failure, requiring the same to be remedied, shall have been given to
Servicer by Trustee, or to Servicer and Trustee by any Investor
Certificateholder, or
(e) any Bankruptcy Event shall occur with respect to Servicer.
In the event of any Servicer Default, so long as such Servicer Default shall not
have been remedied, Trustee (at the direction of the Required Person), by notice
then given in writing to Servicer (a "Termination Notice"), shall terminate all
the rights and obligations (other than obligations of such Servicer under
Sections 8.4 and 11.5) of Servicer as Servicer under this Agreement.
As soon as possible, and in any event within two Business Days, after an
Authorized Officer of Servicer has obtained knowledge of the occurrence of any
Servicer Default, Servicer shall furnish Transferor, Trustee and the Required
Person, and Trustee shall promptly furnish each other Investor
Certificateholder, notice of such Servicer Default.
SECTION 10.2 Trustee to Act; Appointment of Successor Servicer.
-------------------------------------------------
(a) On and after Servicer's receipt of a Termination Notice pursuant to
Section 10.1, Servicer shall continue to perform all servicing functions under
- ------------
this Agreement until the date specified in the Termination Notice or otherwise
specified by Trustee in writing or, if no such date is specified in the
Termination Notice, or otherwise specified by Trustee, until a date mutually
agreed upon by Servicer and Trustee. Trustee shall, as promptly as possible
after the giving of a Termination Notice, nominate an Eligible Servicer as
successor servicer (the "Successor Servicer"); provided that (i) in so
appointing any Successor Servicer, Trustee shall give due consideration to any
Successor Servicer proposed by any Required Person, (ii) such Successor Servicer
is approved by the Required Person and (iii) such Successor Servicer shall
accept its appointment by a written assumption in a form acceptable to Trustee
and the Required Person. In the event that a Successor Servicer has not been
appointed or has not accepted its appointment at the time when Servicer ceases
to act as Servicer, Trustee without further action shall automatically be
appointed the Successor Servicer. Trustee may delegate any of its servicing
obligations to an affiliate or agent in accordance with Section 3.1(b). If
--------------
Trustee is prohibited by applicable law from performing the duties of Servicer
hereunder, Trustee may appoint, or may petition a court of competent
jurisdiction to appoint, a Successor Servicer hereunder. Trustee shall give
prompt notice to each Investor Certificateholder upon the appointment of a
Successor Servicer.
(b) After Servicer's receipt of a Termination Notice, and on the date that a
Successor Servicer shall have been appointed by Trustee and shall have accepted
the appointment pursuant to subsection (a), all authority and power of Servicer
--------------
under this Agreement shall pass to and be vested in the Successor Servicer (a
"Service Transfer"); and, without limitation, Trustee is hereby authorized and
empowered to execute and deliver, on behalf of Servicer, as attorney-in-fact or
otherwise, all documents and instruments, and to do and accomplish all other
acts or things that Trustee reasonably determines are necessary or appropriate
to effect the purposes of the Service Transfer. Upon the appointment of the
Successor Servicer and its acceptance thereof, Servicer agrees that it will
terminate its activities as Servicer hereunder in a manner that Trustee
indicates will facilitate the
40
<PAGE>
transition of the performance of such activities to the Successor Servicer.
Servicer agrees that it shall use best efforts to assist the Successor Servicer
in assuming the obligations to service and administer the Receivables and the
Related Transferred Assets, on the terms and subject to the conditions set forth
herein, and to effect the termination of the responsibilities and rights of
Servicer to conduct servicing hereunder, including the transfer to such
Successor Servicer of all authority of Servicer to service the Receivables and
Related Transferred Assets provided for under this Agreement and all authority
over all cash amounts that shall thereafter be received with respect to the
Receivables or the Related Transferred Assets. Servicer shall, within five
Business Days after the designation of a Successor Servicer, transfer its
electronic records (and any related software and software licenses,
appropriately assigned and prepaid) relating to the Receivables, the related
Obligor Loan Agreements and the Related Transferred Assets to the Successor
Servicer in such electronic form as the Servicer may have maintained the same
and shall promptly transfer to the Successor Servicer all other records,
correspondence and documents necessary for the continued servicing of the
Receivables and the Related Transferred Assets in the manner and at such times
as the Successor Servicer shall request. To the extent that compliance with this
Section shall require any Servicer to disclose to the Successor Servicer
information of any kind that such Servicer deems to be confidential, prior to
the transfer contemplated by the preceding sentence the Successor Servicer shall
be required to enter into a reasonable confidentiality agreement which shall
permit it to carry out its duties in the best interests of the Investor
Certificateholders. The termination of the Servicer having occurred as a
consequence of a Servicer Default, all reasonable costs and expenses (including
attorneys' fees and disbursements) incurred in connection with transferring the
Receivables, the Related Transferred Assets and all related Records (including
the related Contracts) to the Successor Servicer and amending this Agreement and
the other Transaction Documents to reflect such succession as Servicer pursuant
to this Section shall be paid by the predecessor Servicer within 15 days after
presentation of reasonable documentation of the costs and expenses; provided
that if the predecessor Servicer or preceding Servicer, as the case may be,
fails to make such payment within such time, Transferor shall make such payment
within five days thereafter. The predecessor or Servicer shall be entitled to
any accrued fees.
(c) Upon its appointment and acceptance thereof, the Successor Servicer
shall be the successor in all respects to Servicer with respect to servicing
functions under this Agreement and shall be subject to all the responsibilities
and duties relating thereto placed on Servicer by the terms and provisions
hereof (and shall carry out such responsibilities and duties in accordance with
standards of reasonable commercial prudence), and all references in this
Agreement to Servicer shall be deemed to refer to the Successor Servicer.
(d) All authority and power granted to Servicer or the Successor Servicer
under this Agreement shall automatically cease and terminate upon termination of
the Trust pursuant to Section 12.1, and shall pass to and be vested in
------------
Transferor and, without limitation, Transferor is hereby authorized and
empowered, on and after the effective date of such termination, to execute and
deliver, on behalf of Servicer or the Successor Servicer, as attorney-in-fact or
otherwise, all documents and other instruments and to do and accomplish all
other acts or things that Transferor reasonably determines are necessary or
appropriate to effect the purposes of such transfer of servicing rights.
Servicer or Successor Servicer agrees to cooperate with Transferor in effecting
the termination of the responsibilities and rights of Servicer or Successor
Servicer to conduct servicing of the Receivables and the Related Transferred
Assets. Servicer or Successor Servicer shall, within five Business Days after
such termination, transfer its electronic records relating to the Receivables
and the Related Transferred Assets to Transferor in such electronic form as
Transferor may reasonably request and shall transfer all other records,
correspondence and documents relating to the
41
<PAGE>
Receivables and the Related Transferred Assets to Transferor in the manner and
at such times as Transferor shall reasonably request. To the extent that
compliance with this Section shall require Servicer or Successor Servicer to
disclose to Transferor information of any kind that Servicer or Successor
Servicer deems to be confidential, Transferor shall be required to enter into
such customary licensing and confidentiality agreements as Servicer or Successor
Servicer shall deem necessary to protect its interests. All reasonable costs and
expenses (including attorneys' fees and disbursements) incurred by Trustee in
connection with the termination shall be paid by Transferor within 15 days after
presentation of reasonable documentation of the costs and expenses. Trustee may
reserve and withhold from distributions to the Transferor such amounts as it
reasonably determines may be required for the payment of such costs and
expenses.
Notwithstanding any provisions contained in any Transaction Document to the
contrary, Transferor shall not, and shall not be obligated to, pay any amount
pursuant to this Section. Any amount which Transferor does not pay pursuant to
the operation of the preceding sentence shall not constitute a claim (as defined
in (S)101 of the Bankruptcy Code) against or company obligation of Transferor
for any such insufficiency.
(e) To the extent that this Agreement or any other Transaction Document
requires Servicer to obtain information from another Person or to cause another
Person to act or abstain from acting, such provision shall be construed only to
require a Successor Servicer to use reasonable efforts to obtain information
from another Person or to cause another Person to act or abstain from acting.
SECTION 10.3 Notification of Servicer Default, Notification of
-------------------------------------------------
Appointment of Successor Servicer. Within two Business Days after an Authorized
- ---------------------------------
Officer of Servicer becomes aware of any Servicer Default, Servicer shall give
written notice thereof to Transferor, Trustee and the Required Person, and
Trustee shall, promptly upon receipt of the written notice, give notice to the
other Investor Certificateholders at their respective addresses appearing in the
Certificate Register. Upon any termination or appointment of a Successor
Servicer pursuant to this Article X, Trustee shall give prompt written notice
---------
thereof to the Investor Certificateholders at their respective addresses
appearing in the Certificate Register.
SECTION 10.4 Waiver of Servicer Defaults. The Required Person may, on
---------------------------
behalf of the Transferor and all the Holders, waive in writing any Servicer
Default hereunder and its consequences. Upon any such waiver of a Servicer
Default, such Servicer Default shall cease to exist, and shall be deemed to have
been remedied for every purpose of this Agreement. No such waiver shall extend
to any subsequent or other Servicer Default or impair any right consequent
thereon except to the extent expressly so waived.
ARTICLE XI
TRUSTEE
SECTION 11.1 Duties of Trustee. Trustee shall have no duty unless it
-----------------
is specifically identified in this Agreement.
(a) Trustee undertakes to perform the duties and only the duties as are
specifically set forth in this Agreement. The provisions of this Article XI
----------
shall apply to Trustee solely in its capacity
42
<PAGE>
as Trustee, and not to Trustee in its capacity as Servicer if it is acting as
Servicer. Trustee shall exercise such of the rights and powers vested in it by
this Agreement and use the same degree of care and skill in their exercise as a
prudent person would exercise or use under the circumstances in the conduct of
his or her own affairs; provided that if Trustee shall assume the duties of
Servicer pursuant to Section 10.2, Trustee in performing the duties shall use
------------
the degree of skill and attention customarily exercised by a servicer with
respect to trade receivables that it services for itself or others. Trustee
shall have no power to create, assume or incur indebtedness or other liabilities
in the name of the Trust other than as contemplated in, or incidental to the
performance of its duties under, the Transaction Documents.
(b) Trustee, upon receipt of all resolutions, certificates, statements,
opinions, reports, documents, orders or other instruments furnished to Trustee
that are specifically required to be furnished to Trustee pursuant to any
provision of this Agreement, shall examine them to determine whether they are
substantially in the form required by this Agreement. Trustee shall give
written notice to the Person who furnished any item of the type listed in the
preceding sentence of any lack of substantial conformity of any such item to the
applicable requirements of this Agreement. In addition, Trustee shall give
prompt written notice to the Investor Certificateholders of any lack of
substantial conformity of any such instrument to the applicable requirements of
this Agreement discovered by Trustee that would entitle a specified percentage
of the Investor Certificateholders or the Holders of any Series of Certificates
or any Required Person to take any action pursuant to this Agreement. During
the first week of each calendar year, Trustee shall provide the Required Person
with a certificate, signed by a Responsible Officer, to the effect that Trustee
is not aware of any Early Amortization Event (or, if it is aware of any Early
Amortization Event, specifying the nature of that event).
(c) Subject to subsection (a), no provision of this Agreement shall be
--------------
construed to relieve Trustee from liability for its own negligent action, its
own negligent failure to act or its own willful misconduct; provided that:
(i) Trustee shall not be liable for an error of judgment made in
good faith by a Responsible Officer or Responsible Officers of Trustee,
unless it shall be proved that Trustee was negligent in ascertaining the
pertinent facts,
(ii) Trustee shall not be liable with respect to any action taken,
suffered or omitted to be taken by it in good faith in accordance with the
direction (as applicable) of any Required Person relating to the time,
method and place of conducting any proceeding for any remedy available to
Trustee, or exercising any trust or power conferred upon Trustee, under this
Agreement,
(iii) Trustee shall not be charged with knowledge of (A) any
Servicer Default referred to in subsections (a), (b) or (c) of Section 10.1,
--------------- --- --- ------------
(B) any breach of the representations and warranties of Transferor set forth
in Section 7.1, or the representations and warranties of Servicer set forth
-----------
in Section 8.1, (C) any breach of the covenants of Transferor set forth in
-----------
Section 7.2, or the covenants of Servicer set forth in Section 8.2, or (D)
----------- -----------
the ownership of any Certificate for purposes of Section 6.5, in each case
-----------
unless a Responsible Officer of Trustee obtains actual knowledge of the
matter or Trustee receives written notice of the matter from Servicer, or
from any Holder,
43
<PAGE>
(iv) the duties and obligations of Trustee shall be determined
solely by the express provisions of this Agreement, Trustee shall not be
liable except for the performance of the duties and obligations that
specifically shall be set forth in this Agreement, no implied covenants or
obligations shall be read into this Agreement against Trustee and, in the
absence of bad faith on the part of Trustee, Trustee may conclusively rely
on the truth of the statements and the correctness of the opinions expressed
in any certificates or opinions that are furnished to Trustee and that
conform to the requirements of this Agreement, and
(v) without limiting the generality of this section or Section
-------
11.2, Trustee shall have no duty (A) to see to any recording, filing, or
depositing of this Agreement or any agreement referred to herein or any
financing statement evidencing a security interest in the Receivables or the
Related Transferred Assets, or to see to the maintenance of any such
recording or filing or depositing or to any rerecording, refiling or
redepositing of any thereof (except that Trustee (x) shall note in its
records the date of filing of each Public Notice identified to it in writing
as having been filed in connection with the Transaction Documents, or filed
in connection with a predecessor receivables securitization and amended
and/or assigned in connection with the Transaction Documents, and naming
Trustee as secured party or assignee of the secured party, (y) shall, unless
it shall have received an Opinion of Counsel to the effect that no such
filing is necessary to continue the perfection of Transferor's or Trustee's
interests in the Receivables and the Related Assets, cause continuation
statements to be filed with respect to each such Public Notice that is a UCC
financing statement not less than four years and six months and not more
than five years after (1) its filing date and (2) the date of filing of any
prior continuation statement and (z) shall, unless it shall have received an
Opinion of Counsel to the effect that no such filing is necessary to
continue the perfection of Transferor's or Trustee's interests in the
Receivables and the Related Assets, cause appropriate Public Notices that
are not UCC financing statements to be filed to continue the perfection of
Transferor's or Trustee's interests in the Receivables and the Related
Assets within the requisite time periods), (B) to see to the payment or
discharge of any tax, assessment, or other governmental charge or any
Adverse Claim or encumbrance of any kind owing with respect to, assessed or
levied against, any part of the Trust, (C) to confirm or verify the contents
of any reports or certificates of Servicer delivered to Trustee pursuant to
this Agreement that are believed by Trustee to be genuine and to have been
signed or presented by the proper party or parties or (D) to ascertain or
inquire as to the performance or observance of any of Transferor's,
Servicer's representations, warranties or covenants, Servicer's duties and
obligations as Servicer.
(d) Trustee shall not be required to expend or risk its own funds or
otherwise incur financial liability in the performance of any of its duties
hereunder or in the exercise of any of its rights or powers, if Trustee
reasonably believes that the repayment of such funds or adequate indemnity
against such risk or liability is not reasonably assured to it, and none of the
provisions contained in this Agreement shall in any event require Trustee to
perform, or be responsible for the manner of performance of, any obligations of
Servicer or the Verification Company under this Agreement except during the
time, if any, that Trustee shall be the successor to, and be vested with the
rights, duties, powers and privileges of, Servicer in accordance with the terms
of this Agreement.
Notwithstanding the foregoing, as Successor Servicer, Trustee shall have no
liability arising out of or resulting from any act, omission or breach of this
Agreement and of any other Transaction Document of the terminated Servicer,
Transferor or Seller. The Successor Servicer shall have no
44
<PAGE>
liability to any Certificateholder, Trustee, or to any other Person, for any
costs, expenses, losses, damages, claims and liabilities arising out of or
resulting from delays of the terminated Servicer or Transferor in transmitting
Records to the Successor Servicer, permitting inspection of Records or
facilities, or for any other costs, expenses, losses, damages, claims and
liabilities incurred in the servicing transition.
(e) Except for actions expressly authorized by this Agreement, Trustee shall
take no action reasonably likely to impair the interests of the Trust in any
Transferred Asset now existing or hereafter created or to impair the value of
any Transferred Asset now existing or hereafter created.
(f) Except to the extent expressly provided otherwise in this Agreement,
Trustee shall have no power to vary the Transferred Assets.
(g) In the event that the Paying Agent or the Transfer Agent and Registrar
shall fail to perform any obligation, duty or agreement in the manner or on the
day on which such obligation, duty or agreement is required to be performed by
the Paying Agent or the Transfer Agent and Registrar, as the case may be, under
this Agreement, Trustee shall be obligated, promptly upon its actual knowledge
thereof, to perform the obligation, duty or agreement in the manner so required.
SECTION 11.2 Certain Matters Affecting Trustee. Except as otherwise
---------------------------------
provided in Section 11.1:
------------
(a) Trustee may rely on and shall be protected in acting on, or in
refraining from acting in accordance with, any resolution, Officer's
Certificate, opinion of counsel, certificate of auditors or any other
certificate, statement, instrument, instruction, opinion, report, notice,
request, consent, order, appraisal, bond or other paper or document and any
information contained therein reasonably believed by it to be genuine and to
have been signed or presented to it pursuant to this Agreement by the proper
party or parties including, but not limited to, reports and records required by
Article III,
- -----------
(b) Trustee may consult with counsel and any opinion of counsel rendered by
counsel reasonably satisfactory to Transferor the Required Person shall be full
and complete authorization and protection in respect of any action taken or
permitted or omitted by it hereunder in good faith and in accordance with such
opinion of counsel,
(c) Trustee (including in its role as Successor Servicer, if it ever acts in
that capacity) shall be under no obligation to exercise any of the rights or
powers vested in it by this Agreement, or to institute, conduct or defend any
litigation or other proceeding hereunder or in relation hereto, at the request,
order or direction of any of the Certificateholders, pursuant to the provisions
of this Agreement, unless such Certificateholders shall have offered to Trustee
reasonable security or indemnity against the costs, expenses and liabilities
that may be incurred therein or thereby; provided that nothing contained herein
shall relieve Trustee of the obligations, upon the occurrence and continuance of
a Servicer Default that has not been cured, to exercise such of the rights and
powers vested in it by this Agreement and to use the same degree of care and
skill in their exercise as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs,
45
<PAGE>
(d) Trustee shall not be personally liable for any action taken, permitted
or omitted by it in good faith and believed by it to be authorized or within the
discretion or rights or powers conferred upon it by this Agreement,
(e) Trustee shall not be bound to make any investigation into the facts of
matters stated in any resolution, certificate, statement, instrument, opinion,
report, notice, request, consent, order, approval, bond or other paper or
document, unless requested in writing to do so by the Required Person; provided
that if the payment within a reasonable time to Trustee of the costs, expenses,
or liabilities likely to be incurred by it in connection with making such
investigation shall be, in the opinion of Trustee, not reasonably assured to
Trustee by the security afforded to it by the terms of this Agreement, Trustee
may require reasonable indemnity from the Required Person against such cost,
expense, or liability as a condition to proceeding with the investigation. The
reasonable expense of every examination shall be paid by Servicer or, if paid by
Trustee, shall be reimbursed by Servicer upon demand or Transferor if Servicer
fails to make such payment,
(f) Trustee may execute any of the trusts or powers hereunder or perform any
duties hereunder either directly or by or through agents, representatives,
attorneys or a custodian, and Trustee shall not be responsible for any
misconduct or negligence on the part of any agent, representative, attorney or
custodian appointed with due care by it hereunder,
(g) except as may be required by Sections 11.1(b) and 11.1(c)(v) hereof,
---------------- ----------
Trustee shall not be required to make any initial or periodic examination of any
documents or records related to the Transferred Assets for the purpose of
establishing the presence or absence of defects or for any other purpose,
(h) whether or not therein expressly so provided, every provision of this
Agreement relating to the conduct or affecting the liability of or affording
protection to Trustee shall be subject to the provisions of this section,
(i) Trustee shall have no liability with respect to the acts or omissions of
Servicer or the Verification Company (except and to the extent Servicer is
Trustee), including, but not limited to, acts or omissions in connection with:
(A) the servicing, management, administration or verification of the Receivables
or the Related Transferred Assets, (B) calculations made by Servicer or the
Verification Company whether or not reported to Trustee, and (C) deposits into
or withdrawals from Transaction Accounts established pursuant to the terms of
this Agreement, and
(j) in the event that Trustee is also acting as Paying Agent or Transfer
Agent and Registrar hereunder, the rights and protections afforded to Trustee
pursuant to this Article XI shall also be afforded to Trustee acting as Paying
----------
Agent or as Transfer Agent and Registrar.
SECTION 11.3 Limitation on Liability of Trustee. Trustee shall at no
----------------------------------
time have any responsibility or liability for or with respect to the correctness
of the recitals contained herein or in the Certificates (other than the
certificate of authentication on the Certificates). Except as set forth in
Section 11.15, Trustee makes no representations as to the validity or
- -------------
sufficiency of this Agreement, the Certificates (other than the certificate of
authentication on the Certificates) any other Transaction Document or any
Transferred Asset or related document. Trustee shall not be accountable for the
use or application (i) by Transferor of any of the Certificates or of the
proceeds of such Certificates, or (ii) for the use or application of any funds
paid to Transferor or to Servicer (other than to Trustee
46
<PAGE>
in its capacity as Servicer) in respect of the Transferred Assets or deposited
by Servicer in or withdrawn by Servicer from the Bank Accounts, the Transaction
Accounts or any other accounts hereafter established to effectuate the
transactions contemplated herein or in the other Transaction Documents and in
accordance with the terms hereof or thereof.
Except as provided in Section 11.1(c)(v), Trustee shall at no time have any
------------------
responsibility or liability for or with respect to the legality, validity, or
enforceability of any ownership or security interest in any Transferred Asset,
or the perfection or priority of such a security interest or the maintenance of
any such perfection or priority, or for the generation of the payments to be
distributed to Certificateholders under this Agreement, including: (a) the
existence and substance of any Transferred Asset or any related Record or any
computer or other record thereof, (b) the validity of the transfer of any
Transferred Asset to the Trust or of any preceding or intervening transfer, (c)
the performance or enforcement of any Transferred Asset, (d) the compliance by
Transferor, Servicer with any warranty or representation made under this
Agreement or in any other Transaction Document and the accuracy of any such
warranty or representation prior to Trustee's receipt of actual notice of any
noncompliance therewith or any breach thereof, (e) the acts or omissions of
Transferor, Servicer, Seller or any Obligor, (f) any action of Servicer taken in
the name of Trustee, or (g) any action by Trustee taken at the instruction of
Servicer; provided that the foregoing shall not relieve Trustee of its
obligation to perform its duties (including but not limited to its duties, if
any, to act as Servicer in accordance with Section 10.2) under the Agreement in
------------
accordance with the terms hereof.
Except with respect to a claim based on the failure of Trustee to perform
its duties under this Agreement or based on Trustee's negligence or willful
misconduct, no recourse shall be had against Trustee in its individual capacity
for any claim (a "Non-Recourse Claim") based on any provision of this Agreement,
any other Transaction Document, the Certificates, any Transferred Asset or any
assignment thereof. Trustee shall not have any personal obligation, liability,
or duty whatsoever to any Certificateholder or any other Person with respect to
any Non-Recourse Claim, and any such claim shall be asserted solely against the
Trust or any indemnitor who shall furnish indemnity to the Trust or Trustee as
provided in this Agreement.
SECTION 11.4 Trustee May Deal with Other Parties. Subject to any
-----------------------------------
restrictions that may otherwise be imposed by Section 406 of ERISA or Section
4975(e) of the Internal Revenue Code, Trustee in its individual or any other
capacity may deal with the other parties hereto (other than Transferor) and
their respective affiliates, with the same rights as it would have if it were
not Trustee.
SECTION 11.5 Eligibility Requirements for Trustee. Trustee hereunder
------------------------------------
shall at all times: (a) be (i) a banking institution organized under the laws
of the United States, (ii) a member bank of the Federal Reserve System or (iii)
any other banking institution or trust company, incorporated and doing business
under the laws of any State or of the United States, a substantial portion of
the business of which consists of receiving deposits or exercising fiduciary
powers similar to those permitted to national banks under the authority of the
Comptroller of the Currency, and that is supervised and examined by a state or
federal authority having supervision over banks, (b) have a combined capital and
surplus of at least $250,000,000 and (c) have an unsecured long-term debt rating
of at least "A" or its equivalent. If such corporation or association publishes
reports of condition at least annually, pursuant to law or to the requirements
of the aforesaid supervising or examining authority, then, for the purpose of
this section, the combined capital and surplus of the corporation or association
shall be deemed
to be its combined capital and surplus as set forth in its most recent report of
condition so published. If at any time Trustee shall cease to be eligible in
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accordance with the provisions of this section, Trustee shall resign immediately
in the manner and with the effect specified in Section 11.6.
------------
SECTION 11.6 Resignation or Removal of Trustee.
---------------------------------
(a) Trustee may at any time (a) resign and be discharged from its
obligations hereunder by giving 30 days prior written notice thereof to
Transferor, Servicer, the Verification Company, the Investor Certificateholders
and the Required Person or (b) be removed and discharged from its obligations
hereunder by the Required Person giving 10 days' prior written notice thereof to
Transferor, Servicer, the Investor Certificateholders and Trustee. Upon
receiving the notice of resignation or removal, Transferor shall promptly
appoint a successor Trustee who meets the eligibility requirements set forth in
Section 11.5 by written instrument, in duplicate, one copy of which shall be
- ------------
delivered to the resigning Trustee and one copy to the successor Trustee. If no
successor Trustee shall have been so appointed and shall have accepted
appointment within 30 days after the giving of the notice of resignation or
within 10 days after the giving of the notice of removal, the resigning or
removed Trustee, upon notice to the Required Person, may petition any court of
competent jurisdiction to appoint a successor Trustee.
(b) If at any time Trustee shall cease to be eligible to be Trustee
hereunder in accordance with the provisions of Section 11.5 hereof and shall
------------
fail to resign promptly after its receipt of a written request therefor by the
Required Person, or if at any time Trustee shall be legally unable to act, or
shall be adjudged bankrupt or insolvent, or if a receiver for Trustee or of its
property shall be appointed, or any public officer shall take charge or control
of Trustee or of its property or affairs for the purpose of rehabilitation,
conservation or liquidation, then Transferor may remove Trustee and, subject to
the consent of the Required Person (which consent shall not be unreasonably
withheld or delayed), promptly appoint a successor Trustee by written
instrument, in duplicate, one copy of which shall be delivered to Trustee so
removed and one copy to the successor Trustee.
(c) Any resignation or removal of Trustee and appointment of a successor
Trustee pursuant to any of the provisions of this section shall not become
effective until acceptance of appointment by the successor Trustee as provided
in Section 11.7 hereof. Any resignation or removal of Trustee, when effective,
------------
shall terminate Trustee in all capacities under the Transaction Documents.
SECTION 11.7 Successor Trustee.
-----------------
(a) Any successor Trustee appointed as provided in Section 11.6 shall
------------
execute, acknowledge and deliver to Transferor, Servicer, the Investor
Certificateholders and the predecessor Trustee an instrument accepting such
appointment hereunder, and thereupon the resignation or removal of the
predecessor Trustee shall, upon payment of its fees and expenses and other
amounts owed to it pursuant to this Agreement become effective and the successor
Trustee, without any further act, deed or conveyance, shall become fully vested
with all the rights, powers, duties and obligations of its predecessor
hereunder, with like effect as if originally named as Trustee herein. The
predecessor Trustee shall deliver to the successor Trustee, at the expense of
Servicer, all documents or copies thereof and statements held by it hereunder;
and Transferor and the predecessor Trustee shall execute and deliver such
instruments and do such other things as may reasonably be required for fully
vesting and confirming in the successor Trustee all such rights, powers, duties
and obligations.
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(b) No successor Trustee shall accept appointment as provided in this
section unless at the time of the acceptance the successor Trustee shall be
eligible to become Trustee under the provisions of Section 11.5.
------------
(c) Upon acceptance of appointment by a successor Trustee as provided in
this section, the successor Trustee shall mail notice of the succession
hereunder to all Investor Certificateholders at their addresses as shown in the
Certificate Register and to the Required Person.
SECTION 11.8 Merger or Consolidation of Trustee. Any Person into
----------------------------------
which Trustee may be merged or converted or with which it may be consolidated,
or any Person resulting from any merger, conversion or consolidation to which
Trustee shall be a party, or any Person succeeding to all or substantially all
of the corporate trust business of Trustee, shall be the successor of Trustee
hereunder, if the Person meets the requirements of Section 11.5, without the
------------
execution or filing of any paper or any further act on the part of any of the
parties hereto, anything herein to the contrary notwithstanding. Trustee shall
promptly give notice to the Required Person upon any merger or consolidation of
Trustee.
SECTION 11.9 Appointment of Co-Trustee or Separate Trustee.
---------------------------------------------
(a) Notwithstanding any other provisions of this Agreement, at any time, for
the purpose of meeting any legal requirements of any jurisdiction in which any
part of the Trust may at the time be located, Trustee shall have the power and
may execute and deliver all instruments to appoint one or more Persons (who may
be an employee or employees of Trustee) to act as a co-Trustee or co-Trustees,
or separate Trustee or separate Trustees, with respect to all or any part of the
Trust, and to vest in such Person or Persons, in such capacity and for the
benefit of the Certificateholders, such title to the Trust, or any part thereof,
and, subject to the other provisions of this section, such powers, duties,
obligations, rights and trusts as Trustee may consider necessary or appropriate;
provided, that such appointment shall be subject to the prior written consent of
Transferor unless an Early Amortization Event or Servicer Default is continuing;
and provided further, that in any event Trustee will give Transferor and
Servicer prior written notice of such appointment. No co-Trustee or separate
Trustee shall be required to meet the terms of eligibility as a successor
Trustee under Section 11.5 and no notice to Certificateholders of the
------------
appointment of any co-Trustee or separate Trustee shall be required under
Section 11.7.
- ------------
(b) Every separate Trustee and co-Trustee shall, to the extent permitted by
law, be appointed and act subject to the following provisions and conditions:
(i) all rights, powers, duties and obligations conferred or
imposed upon Trustee shall be conferred or imposed upon and exercised or
performed by Trustee and the separate Trustee or co-Trustee jointly (it
being understood that the separate Trustee or co-Trustee is not authorized
to act separately without Trustee joining in such act), except to the extent
that under any law of any jurisdiction in which any particular act or acts
are to be performed (whether as Trustee hereunder or as successor to
Servicer hereunder), Trustee shall be incompetent or unqualified to perform
such act or acts, in which event such rights, powers, duties and obligations
(including the holding of title to the Trust or any portion thereof in any
such jurisdiction) shall be exercised and performed singly by such separate
Trustee or co-Trustee, but solely at the direction of Trustee,
49
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(ii) no Trustee or co-Trustee hereunder shall be personally liable
by reason of any act or omission of any other Trustee or co-Trustee
hereunder, and
(iii) Trustee may at any time accept the resignation of or remove
any separate Trustee or co-Trustee.
(c) Any notice, request or other writing given to Trustee shall be deemed to
have been given to each of the then separate Trustees and co-Trustees, as
effectively as if given to each of them. Every instrument appointing any
separate Trustee or co-Trustee shall refer to this Agreement and the conditions
of this Article XI. Each separate Trustee and co-Trustee, upon its acceptance
----------
of the trusts conferred, shall be vested with the estates or property specified
in its instrument of appointment, either jointly with Trustee or separately, as
may be provided therein, subject to all the provisions of this Agreement,
specifically including every provision of this Agreement relating to the conduct
of, affecting the liability of, or affording protection or indemnity to,
Trustee. Every such instrument shall be filed with Trustee and a copy thereof
given to Servicer.
(d) Any separate Trustee or co-Trustee may at any time constitute Trustee,
its agent or attorney-in-fact with full power and authority, to the extent not
prohibited by law, to do any lawful act under or in respect to this Agreement or
any other Transaction Document on its behalf and in its name. If any separate
Trustee or co-Trustee shall die, become incapable of acting, resign or be
removed, all its estates, properties, rights, remedies and trusts shall vest in
and be exercised by Trustee, to the extent permitted by law, without the
appointment of a new or successor Trustee or co-Trustee.
SECTION 11.10 Tax Returns. No Federal income tax return shall be
-----------
filed on behalf of the Trust unless required by applicable law or any
Governmental Authority. In the event the Trust shall be required to file tax
returns, Servicer shall prepare or shall cause to be prepared any tax returns
required to be filed by the Trust and shall remit the returns to Trustee for
signature at least five Business Days before the returns are due to be filed.
Trustee shall promptly sign and deliver the returns to Servicer and Servicer
shall promptly file the returns. Servicer shall also prepare or shall cause to
be prepared all tax information required by law to be made available to
Certificateholders and shall deliver the information to Trustee at least five
Business Days prior to the date it is required by law to be made available to
the Certificateholders. Trustee, upon request, will furnish Servicer with all
the information known to Trustee as may be reasonably required in connection
with the preparation of all tax returns of the Trust and shall, upon request,
execute such returns as Trustee determines are appropriate.
SECTION 11.11 Trustee May Enforce Claims Without Possession of
------------------------------------------------
Certificates. All rights of action and claims under this Agreement, the
- ------------
Certificates or the other Transaction Documents may be prosecuted and enforced
by Trustee without the possession of any of the Certificates or the production
thereof in any proceeding relating thereto, and any such proceeding instituted
by Trustee shall be brought in its own name as Trustee. Any recovery of judgment
shall, after provision for the payment of the reasonable compensation, expenses,
disbursements and advances of Trustee, its agents and counsel, be distributed to
the Certificateholders in respect of which such judgment has been obtained in
accordance with Article V of this Agreement.
---------
SECTION 11.12 Suits for Enforcement. If an Early Amortization Event
---------------------
or a Servicer Default shall occur and be continuing, Trustee, in its discretion
may, subject to the provisions of
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Sections 11.1 and 11.13, proceed to protect and enforce its rights and the
- ------------- -----
rights of the Certificateholders under this Agreement by suit, action or
proceeding in equity or at law or otherwise, whether for the specific
performance of any covenant or agreement contained in this Agreement or any
other Transaction Document or in aid of the execution of any power granted in
this Agreement or any other Transaction Document or for the enforcement of any
other legal, equitable or other remedy as Trustee, being advised by counsel,
shall deem most effectual to protect and enforce any of the rights of Trustee or
the Certificateholders. Nothing herein contained shall be deemed to authorize
Trustee to authorize or consent to or accept or adopt on behalf of any
Certificateholder any plan of reorganization, arrangement, adjustment or
composition affecting the Investor Certificates or the rights of any Holder
thereof, or to authorize Trustee to vote in respect of the claim of any Investor
Certificateholder in any such proceeding.
SECTION 11.13 Rights of Required Person to Direct Trustee. The
-------------------------------------------
Required Person shall have the right to direct the time, method, and place of
conducting any proceeding for any remedy available to Trustee, or exercising any
trust or power conferred on Trustee; provided that, subject to Section 11.1,
------------
Trustee may decline to follow any such direction if Trustee, being advised by
counsel, determines that the action so directed may not be taken lawfully, or if
a Responsible Officer or Responsible Officers of Trustee shall determine, in
good faith, that the proceedings so directed would be illegal or involve Trustee
in incurring unreimbursed costs and expenses or personal liability or be unduly
prejudicial to the rights of the Investor Certificateholders not giving such
direction; and provided further, that nothing in this Agreement shall impair the
right of Trustee to take any action deemed proper by Trustee and that is not
inconsistent with such direction of the Required Person.
SECTION 11.14 Representations and Warranties of Trustee. Trustee
-----------------------------------------
represents and warrants that:
(a) it is a national banking association, organized existing and in good
standing under the laws of the United States,
(b) it has full power, authority and right to execute, deliver and perform
the Transaction Documents to which it is a party, and has taken all necessary
action to authorize the execution, delivery and performance by it of the
Transaction Documents, and
(c) the Transaction Documents to which it is a party have been duly executed
and delivered by Trustee and, in the case of all such Transaction Documents, are
legal, valid and binding obligations of Trustee, enforceable in accordance with
their respective terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization or other similar laws affecting
the enforcement of creditors' rights generally and by general principles
of equity, regardless of whether such enforceability is considered in
a proceeding in equity or at law.
SECTION 11.15 Maintenance of Office or Agency. Trustee will maintain,
-------------------------------
at its address designated pursuant to Section 13.5, an office, offices, agency
------------
or agencies where notices and demands to or upon Trustee in respect of the
Certificates and the Transaction Documents to which it is a party may be served.
Trustee will give prompt written notice to Servicer and to the
Certificateholders of any change in the location of the Certificate Register or
any such office or agency.
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ARTICLE XII
TERMINATION
SECTION 12.1 Termination of Trust.
--------------------
(a) If not earlier terminated pursuant to Section 9.3, the Trust and the
-----------
respective obligations and responsibilities of Transferor, Servicer and Trustee
created hereby (other than the obligation of Trustee to make payments to
Certificateholders as hereinafter set forth and the obligations of Servicer
contained in Section 3.5) shall terminate, except with respect to the duties and
-----------
obligations described in Sections 3.9, 7.3, 8.4, 8.10, 11.5, 12.2(b), 13.8,
------------ --- --- ---- ---- ------- ----
13.13, 13.14 and 13.15 upon the earliest to occur of (i) the day on which the
- ----- ----- -----
Investor Certificateholders and Trustee shall have been paid all amounts
required to be paid to them pursuant to this Agreement and Trustee has disposed
of all property held hereunder (including pursuant to Section 12.3) and (ii) the
------------
day which is 21 years less one day after the death of the officers and the last
survivor of all the lineal descendants of Joseph P. Kennedy, Ambassador to the
Court of St. James, who are living on the date hereof.
(b) Notwithstanding the foregoing, the last payment of the principal of and
interest on the Investor Certificates shall be due and payable no later than the
Final Scheduled Payment Date. If, on the Report Date for the Distribution Date
immediately prior to the Final Scheduled Payment Date, Servicer determines that
the Invested Amount for such Series on such Final Scheduled Payment Date plus
all other amounts due Investor Certificateholders (after giving effect to all
distributions from available Collections and investment earnings in Transaction
Accounts on such date) will exceed zero, Servicer shall solicit bids from the
public in the manner of a sale conducted by a creditor under the UCC for the
sale of the Transferred Assets for such Series. Transferor shall be entitled to
participate in and to receive notice of each bid submitted in connection with
the bidding process. Upon the expiration of the bidding period, Servicer shall
determine (x) the Highest Bid and (y) the Available Final Distribution Amount
for such Series. If the Highest Bid is not at least equal to the sum of the
Invested Amount and all other amounts due the Investor Certificateholders of
such Series on the Final Scheduled Payment Date for such Series (after giving
effect to all distributions required to be made on the Final Scheduled Payment
Date for the Series), the written consent of the Required Person shall be
required for the sale. Servicer shall sell the Transferred Assets on the Final
Scheduled Payment Date the bidder with the Highest Bid and shall deposit the
proceeds of such sale in the Master Collection Account for allocation (together
with the Available Final Distribution Amount) to the Certificateholders of such
Series.
SECTION 12.2 Final Distribution.
------------------
(a) Servicer shall give Trustee at least 20 Business Days' prior written
notice of the date on which the Trust is expected to terminate in accordance
with Section 12.1(a). The notice shall be accompanied by a certificate of an
---------------
Authorized Officer of Servicer setting forth the information specified in
Section 3.6 covering the period during the then current calendar year through
- -----------
the date of the notice. Upon receiving the notification from Servicer, Trustee
shall give the Certificateholders written notice as soon as practicable after
Trustee's receipt of notice from Servicer, which notice shall specify (i) the
Distribution Date (the "Final Distribution Date") upon which final payment with
respect to the Certificates is expected to be made and (ii) the amount of any
such final payment. Trustee shall give the notice to the Transfer Agent and
Registrar and the Paying Agent at the time such notice is given to
Certificateholders. On the Final Distribution Date, Trustee shall, based upon
the Monthly Report relating to the Final Distribution Date, cause to be
distributed to the
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Certificateholders the amounts distributable to them on the Final
Distribution Date. Each Certificateholder shall present its Certificate
to Trustee and surrender its Certificate for cancellation at the address of
Trustee described in Section 13.5 not more than ten Business Days after the
------------
Final Distribution Date upon which final payment with respect to the
Certificates has been made.
(b) Notwithstanding the termination of the Trust pursuant to Section
-------
12.1(a), all funds then on deposit in the Transaction Accounts shall continue to
be held in trust for the benefit of the Certificateholders and the Paying Agent
or Trustee shall pay such funds to the Certificateholders at the time set forth
in Section 12.2(a). If any Certificateholder does not claim the portion of such
---------------
funds to which it is entitled to receive on the Final Distribution Date,
interest shall cease to accrue on its Certificate and Trustee shall hold such
funds in trust for such Person, subject to the further provisions of this
Section. In the event that any of the Certificateholders shall not have claimed
their final payment with respect to their Certificates within six months after
the Final Distribution Date, Trustee shall give a second written notice to the
remaining Certificateholders concerning payment of the final distribution with
respect thereto and surrender of their Certificates for cancellation. If within
one year after the second notice all the Certificates shall not have been
surrendered for cancellation, Trustee may take appropriate steps, or may appoint
an agent to take appropriate steps, to contact the remaining Certificateholders
concerning surrender of their Certificates, and the cost thereof shall be paid
out of the funds in the Master Collection Account held for the benefit of such
Certificateholders. Trustee and the Paying Agent shall pay to Transferor any
monies held by them for the payment of principal of or interest on the
Certificates that remains unclaimed for two years after the termination of the
Trust pursuant to Section 12.1(a). After payment of the monies to Transferor,
---------------
Certificateholders entitled to the money must look to Transferor for payment as
unsecured general creditors unless an applicable abandoned property law
designates another Person.
SECTION 12.3 Rights Upon Termination of the Trust. Upon the
------------------------------------
termination of the Trust pursuant to Section 12.1 and the surrender of the
------------
Transferor Certificate by Transferor to Trustee, Trustee shall transfer, assign,
set over and otherwise convey to Transferor (without recourse, representation or
warranty), all right, title and interest of the Trust in the Receivables,
whether then existing or thereafter created, the Related Transferred Assets and
all of the other property and rights previously conveyed to Trustee hereunder,
except for amounts held by Trustee pursuant to Section 12.2(b) and except for
---------------
the rights of HCFF Indemnified Parties (other than Transferor and its officers,
directors, shareholders, controlling Persons, employees and agents)
to indemnification and contribution under Section 9.1 of the Purchase
-----------
Agreement. Trustee shall execute and deliver the instruments of transfer and
assignment (including any document necessary to release the security interest in
favor of Trustee (for the benefit of the Certificateholders) in such Receivables
and Related Transferred Assets, to release any filing evidencing or perfecting
such security interest and to terminate all powers of attorney created by the
Transaction Documents), in each case without recourse, representation or
warranty, that shall be reasonably requested by Transferor to vest in Transferor
all right, title and interest that Trustee had in the Transferred Assets.
SECTION 12.4 Optional Repurchase of Investor Interests. On any
-----------------------------------------
Distribution Date occurring on or after the date that the Invested Amount of is
reduced to 10% or less of the initial aggregate principal amount of the Investor
Certificates, and no Early Amortization Event exists for any Series, Transferor
or Servicer shall have the option, upon the giving of 45 days prior written
notice to Servicer, Trustee and the Required Person to repurchase the undivided
interest of such Series in the Trust by depositing into the Principal Funding
Account, on such Distribution Date (the "Repurchase Distribution Date") an
amount (the "Repurchase Amount") equal to the unpaid Invested
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<PAGE>
Amount of the Series plus accrued and unpaid interest on the unpaid principal
amount of the Series (and accrued and unpaid interest with respect to interest
amounts that were due but not paid on a prior Distribution Date) through the day
preceding such Distribution Date at the Certificate Rate applicable to such
Series, without the payment of any premium or penalty. Upon tender of all
outstanding Certificates owned by a Certificateholder, Trustee shall then
distribute to such Certificateholder the portion of such amounts owed to such
Certificateholder, together with all other amounts on deposit in the Principal
Funding Account with respect to that Series that are owed to such
Certificateholder, on the next Distribution Date in repayment of the principal
amount and all accrued and unpaid interest owing to such Certificateholder.
Interest shall cease to accrue on the Repurchase Distribution Date and following
the Repurchase Distribution Date, the Certificateholders of the Series shall
have no further rights with respect to the Transferred Assets and Trustee shall
execute and deliver the instruments of transfer and assignment (including any
document necessary to release the security interest in favor of Trustee (for the
benefit of the Certificateholders) in the Transferred Assets and to release any
filing evidencing or perfecting the security interest), in each case without
recourse, representation or warranty, as shall be reasonably requested by
Transferor to vest in Transferor all right, title and interest that Trustee had
in the Transferred Assets. In the event that Transferor fails for any reason to
deposit the Repurchase Amount for in accordance with the terms of this
Agreement, payments shall continue to be made to the Certificateholders of each
Series in accordance with the terms of this Agreement.
ARTICLE XIII
MISCELLANEOUS PROVISIONS
SECTION 13.1 Amendment, Waiver, Consents of Required Person, Etc.
----------------------------------------------------
(a) Except to the extent provided otherwise hereinafter in clauses (i) and
-----------
(ii), the provisions of this Agreement may be amended, modified or waived from
- ----
time to time by Servicer, Transferor and Trustee, with the consent of the
Required Person, for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of this Agreement or of modifying in
any manner the rights of the Certificateholders; provided, however, that no such
amendment, modification or waiver shall:
(i) reduce in any manner the amount of, or delay the timing of,
allocations, payments or distributions in respect of the portion of the
Invested Amount, yield on any Certificates or other distributions on any
Certificates without the consent of each Certificateholder; or
(ii) amend, modify or waive any provision of this Agreement which
requires the approval or consent of a specified percentage of
Certificateholders without the consent of the same percentage of
Certificateholders.
Trustee shall establish a record date for determining which Certificateholders
may give such waivers and consents. No waiver of any Early Amortization Event
or other default hereunder given at any time shall apply to any other prior or
subsequent Amortization Event or default.
(b) As soon as practicable before the execution and delivery of any
amendment, consent or waiver pursuant to Section 13.1(a), but in no event later
---------------
than twenty Business Days prior to such
54
<PAGE>
execution and delivery, Trustee shall deliver a copy of such proposed amendment,
consent or waiver to each Certificateholder.
(c) Promptly after the execution of any such amendment, consent or waiver,
Trustee shall furnish copies of such amendment or consent to each
Certificateholder.
(d) The manner of obtaining any waiver or consent given by the
Certificateholders under this Section 13.1 and of evidencing the authorization
------------
of the execution thereof by the Certificateholders shall be subject to such
reasonable requirements as Trustee may prescribe.
(e) Each consent or waiver given by any Certificateholder in connection with
any matter described in Section 13.1 or in any other provision of this Agreement
------------
shall be conclusive and binding on such Certificateholder and on all future
Certificateholders and of any Certificate issued upon the transfer thereof or in
exchange therefor or in lieu thereof whether or not notation of such consent is
made upon such Certificate.
(f) Any request for approval or consent of the Required Person required
under the Transaction Documents shall be made in writing delivered by facsimile
(confirmed in writing) or overnight courier (with signed receipt evidencing
delivery) to the Required Person. The Required Person shall either approve or
reject any such request within five (5) Business Days of its receipt of such
request. If the Required Person does not respond to any such request within
five (5) Business Days of its receipt of any such request, such request shall be
deemed to have bee approved by the Required Person.
SECTION 13.2 Actions by Certificateholders.
-----------------------------
(a) By its acceptance of Certificates pursuant to this Agreement, each
Certificateholder acknowledges and agrees that, wherever in this Agreement a
provision states that an action may be taken or a notice, demand or instruction
given by any Series of Investor Certificateholders, any class of Investor
Certificateholders or the Investor Certificateholders, the action, notice or
instruction may be taken or given by any Holder of an Investor Certificate of
the Series or class or by any Investor Certificateholder, respectively, unless
the provision requires a specific percentage of the Series or class of Investor
Certificateholders or of all Investor Certificateholders.
(b) By its acceptance of Certificates pursuant to this Agreement, each
Certificateholder acknowledges and agrees that any request, demand,
authorization, direction, notice, consent, waiver or other act by the Holder of
a Certificate shall bind the Holder and every subsequent Holder of the
Certificate and of any Certificate issued upon the registration of transfer
thereof or in exchange therefor or in lieu thereof in respect of anything done
or omitted to be done by Trustee or Servicer in reliance thereon, whether or not
notation of the action is made upon such Certificate.
(c) Any request, demand, authorization, direction, notice, consent, waiver
or other action provided by this Agreement to be given or taken by
Certificateholders may be embodied in and evidenced by one or more instruments
of substantially similar tenor signed by the Certificateholders in person or by
agent duly appointed in writing; and except as herein otherwise expressly
provided, the action shall become effective when the instrument or instruments
are delivered to Trustee and, when required, to Servicer. Proof of execution of
any such instrument or of a writing appointing any
55
<PAGE>
such agent shall be sufficient for any purpose of this Agreement and conclusive
in favor of Trustee and Servicer, if made in the manner provided in this
section.
(d) The fact and date of the execution by any Certificateholder of any such
instrument or writing may be proved in any reasonable manner that Trustee deems
sufficient.
SECTION 13.3 Limitation on Rights of Certificateholders.
------------------------------------------
(a) The death or incapacity of any Certificateholder shall not operate to
terminate this Agreement or the Trust, nor shall the death or incapacity entitle
such Certificateholder's legal representatives or heirs to claim an accounting
or to take any action or commence any proceeding in any court for a partition or
winding up of the Trust, nor otherwise affect the rights, obligations and
liabilities of the parties hereto or any of them.
(b) No Certificateholder shall have any right to vote (except as expressly
provided otherwise in this Agreement) or in any manner otherwise to control the
operation and management of the Trust, or the obligations of the parties hereto,
nor shall anything herein set forth, or contained in the terms of the
Certificates, be construed so as to constitute the Certificateholders from time
to time as partners or members of an association, nor shall any
Certificateholder be under any liability to any third Person by reason of any
action taken by the parties to this Agreement pursuant to any provision hereof.
(c) No Certificateholder shall have any right by virtue of any provisions of
this Agreement to institute any suit, action or proceeding in equity or at law
upon or under or with respect to the Transaction Documents (except to the extent
any related Certificate Purchase Agreement creates independent and non-
duplicative rights), unless the Certificateholder previously shall have given to
Trustee, and unless the Required Person shall have made, written request upon
Trustee to institute such action, suit or proceeding in its own name as Trustee
hereunder and shall have offered to Trustee such reasonable indemnity as it may
require against the costs, expenses and liabilities to be incurred therein or
thereby, and Trustee, for 30 days after its receipt of such notice, request and
offer of indemnity, shall have neglected or refused to institute any such
action, suit or proceeding; it being understood and intended, and being
expressly covenanted by each Certificateholder with every other
Certificateholder and Trustee, that no one or more Certificateholders shall have
any right in any manner whatever by virtue of, or by availing itself or
themselves of, any provisions of a Transaction Document to affect, disturb or
prejudice the rights of any other Investor Certificateholder, or to obtain or
seek to obtain priority over or preference to any such other Investor
Certificateholder, except to the extent provided in the Transaction Documents,
or to enforce any right under the Transaction Documents, except in the manner
herein provided and for the equal, ratable and common benefit of, all Investor
Certificateholders (subject to the priorities set forth in the Transaction
Documents). For the protection and enforcement of the provisions of this
section, each and every Certificateholder and Trustee shall be entitled to such
relief as can be given either at law or in equity.
(d) By their acceptance of Certificates pursuant to this Agreement, the
Certificateholders agree to the provisions of this section.
SECTION 13.4 Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN
-------------
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
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SECTION 13.5 Notices. All demands, notices, instructions and
-------
communications hereunder shall be in writing and shall be deemed to have been
duly given if personally delivered, four Business Days after mailing if mailed
by certified mail, return receipt requested, or sent by facsimile transmission
(a) in the case of Transferor, to its address set forth below its signature
hereto, (b) in the case of Servicer, to its address set forth below its
signature hereto, (c) in the case of the Verification Company, to its address
set forth below its signature hereto, and (d) in the case of Trustee, the Paying
Agent or the Transfer Agent and Registrar, to the address of Trustee set forth
on the signature pages hereof; or, as to each party, at such other address or
facsimile number as shall be designated by it in a written notice to each other
party given in accordance with this section. Any notice required or permitted
to be mailed to a Certificateholder shall be sent by first-class mail, postage
prepaid, to the address of such Certificateholder as shown in the Certificate
Register. Any notice so mailed within the time prescribed in this Agreement
shall be conclusively presumed to have been duly given on the fourth Business
Day after the notice is so mailed, whether or not a Certificateholder receives
the notice.
SECTION 13.6 Severability of Provisions. If any one or more of the
--------------------------
covenants, agreements, provisions or terms of this Agreement or any of the other
Transaction Documents shall for any reason whatsoever be held invalid, then the
unenforceable covenants, agreements, provisions or terms shall be deemed
severable from the remaining covenants, agreements, provisions or terms of this
Agreement or the other Transaction Documents (as applicable) and shall in no way
affect the validity or enforceability of the other provisions of this Agreement,
the Certificates or any of the other Transaction Documents or the rights of the
Certificateholders.
SECTION 13.7 Certificates Nonassessable and Fully Paid. Except to the
-----------------------------------------
extent otherwise expressly provided in Section 7.3 with respect to Transferor,
-----------
it is the intention of the parties to this Agreement that the Certificateholders
shall not be personally liable for obligations of the Trust, that the interests
in the Trust represented by the Certificates shall be nonassessable for any
losses or expenses of the Trust or for any reason whatsoever and that
Certificates upon authentication thereof by Trustee pursuant to Section 6.2 are
-----------
and shall be deemed fully paid.
SECTION 13.8 Nonpetition Covenant. Notwithstanding any prior
--------------------
termination of this Agreement, each of Trustee, Servicer, Transferor, the Paying
Agent, the Authenticating Agent, the Transfer Agent and Registrar, and each
Investor Certificateholder by its acceptance of a Certificate, agrees that it
shall not, with respect to the Trust or Transferor, institute or join any other
Person in instituting any proceeding of the type referred to in the definition
of "Bankruptcy Event" so long as any Certificates issued by the Trust shall be
outstanding or there shall not have elapsed one year plus one day since the last
day on which any such Certificates shall have been outstanding. The foregoing
shall not limit the right of Servicer, Transferor, the Paying Agent, the
Authenticating Agent, the Transfer Agent and Registrar and any Certificateholder
to file any claim in or otherwise take any action with respect to any such
insolvency proceeding that was instituted against Transferor or the Trust by any
other Person.
SECTION 13.9 No Waiver; Cumulative Remedies. No failure to exercise
------------------------------
and no delay in exercising, on the part of Trustee or the Investor
Certificateholders, any right, remedy, power or privilege hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or privilege.
The rights, remedies, powers and privileges herein provided are cumulative and
are not exhaustive of any rights, remedies, powers and privileges provided by
law.
57
<PAGE>
SECTION 13.10 Counterparts. This Agreement may be executed in any
------------
number of counterparts and by the different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original,
and all of which together shall constitute one and the same instrument.
SECTION 13.11 Third-Party Beneficiaries. This Agreement will inure to
-------------------------
the benefit of and be binding upon the parties hereto and the Certificateholders
and their respective successors and permitted assigns. Except as otherwise
expressly provided in this Agreement, nothing contained in this Agreement shall
confer any rights upon any Person that is not a party to, or a permitted
assignee of a party to, this Agreement.
SECTION 13.12 Integration. This Agreement and the other Transaction
-----------
Documents contain a final and complete integration of all prior expressions by
the parties hereto with respect to the subject matter hereof and thereof and
shall together constitute the entire agreement among the parties hereto with
respect to the subject matter hereof and thereof, superseding all prior oral or
written understandings.
SECTION 13.13 Binding Effect; Assignability; Survival of Provisions.
-----------------------------------------------------
This Agreement shall be binding upon and inure to the benefit of Transferor,
Servicer, the Verification Company and Trustee and their respective successors
and permitted assigns; provided, that Transferor shall not delegate any of its
obligations hereunder. This Agreement shall create and constitute the
continuing obligations of the parties hereto in accordance with its terms, and
shall remain in full force and effect until the termination of the Trust
pursuant to Section 12.1. The rights and remedies with respect to (a) any breach
------------
of any representation and warranty made by Transferor in Section 2.4 or Section
----------- -------
7.1, (b) any breach of any representation and warranty made by Servicer in
- ---
Section 8.1, and (c) the indemnification and payment provisions in Sections 3.9,
- ----------- ------------
7.3, 8.4, 8.10, 11.5 and 12.2(b) shall be continuing and shall survive any
- --- --- ---- ---- -------
termination of this Agreement.
SECTION 13.14 Recourse to Transferred Assets. The Certificates do not
------------------------------
represent an obligation of, or an interest in, Transferor, Seller, Servicer,
Trustee or any Affiliate of any of them. Except as expressly provided otherwise
in this Agreement, the Certificates are limited in right of payment to the
Transferred Assets.
SECTION 13.15 SUBMISSION TO JURISDICTION. EACH PARTY HERETO HEREBY
--------------------------
IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY NEW YORK STATE OR
FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK, NEW
YORK OVER ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT,
AND HEREBY (A) IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF THE ACTION OR
PROCEEDING MAY BE HEARD AND DETERMINED IN THE STATE OR FEDERAL COURT, (B)
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO, THE DEFENSE
OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF THE ACTION OR PROCEEDING.
AS AN ALTERNATIVE METHOD OF SERVICE TO PERSONAL DELIVERY, EACH OF BUYER AND
SELLER ALSO IRREVOCABLY CONSENTS TO THE SERVICE OF ANY AND ALL PROCESS IN ANY
ACTION OR PROCEEDING BY THE MAILING OF COPIES OF THE PROCESS TO BUYER OR SELLER
(AS APPLICABLE) AT ITS
58
<PAGE>
ADDRESS SPECIFIED HEREIN. NOTHING IN THIS SECTION SHALL AFFECT THE RIGHT OF ANY
PARTY HERETO TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
SECTION 13.16 WAIVER OF JURY TRIAL. EACH PARTY HERETO WAIVES ANY
--------------------
RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY
RIGHTS UNDER OR RELATING TO THE TRANSACTION DOCUMENTS, OR ANY AMENDMENT,
INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR THAT MAY IN THE FUTURE BE
DELIVERED IN CONNECTION THEREWITH OR ARISING FROM ANY COURSE OF CONDUCT, COURSE
OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN), ACTIONS OF ANY OF THE PARTIES
HERETO OR ANY OTHER RELATIONSHIP EXISTING IN CONNECTION WITH THE TRANSACTION
DOCUMENTS, AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A
COURT AND NOT BEFORE A JURY.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
59
<PAGE>
IN WITNESS WHEREOF, Transferor, Servicer and Trustee have caused this
Agreement to be executed by their respective officers thereunto duty authorized
as of the day and year first above written.
WISCONSIN CIRCLE II FUNDING
CORPORATION, as Transferor
By: /s/ Edward P. Nordberg, Jr.
----------------------------
Name: Edward P. Nordberg, Jr.
----------------------------
Title: Executive Vice President
----------------------------
Address: 2 Wisconsin Circle, Suite 320
Chevy Chase, Maryland 20815
Attention: President
Telephone: (301) 664-9827
Facsimile: (301) 664-9860
HCFP FUNDING II, INC., as Servicer
By: /s/ Edward P. Nordberg, Jr.
----------------------------
Name: Edward P. Nordberg, Jr.
----------------------------
Title: Executive Vice President
----------------------------
Address: 2 Wisconsin Circle, Suite 320
Chevy Chase, Maryland 20815
Attention: President
Telephone: (301) 664-9827
Facsimile: (301) 664-9860
FIRST BANK NATIONAL ASSOCIATION,
as Trustee
By:
----------------------------
Name:
----------------------------
Title:
----------------------------
Address:
-----------------------------
-----------------------------
Telephone:
-----------------------------
Facsimile:
-----------------------------
60
<PAGE>
EXHIBITS
EXHIBIT A Reserved
EXHIBIT B Form of Class A Certificate
EXHIBIT C Form of Monthly Servicer's Certificate
EXHIBIT D Annual Agreed-Upon Procedures
EXHIBIT E Form of Transferor Certificate
EXHIBIT F Form of Quarterly Servicer's Certificate
EXHIBIT G Form of Credit and Collections Policy
APPENDIX
APPENDIX A Definitions
61
<PAGE>
EXHIBIT 10.17
- --------------------------------------------------------------------------------
CERTIFICATE PURCHASE AGREEMENT
(SERIES 1997-1, CLASS A)
dated as of June 27, 1997
among
WISCONSIN CIRCLE II FUNDING CORPORATION,
as Transferor,
and
THE PURCHASERS DESCRIBED HEREIN
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS.................................................... 1
SECTION 1.1 Definitions............................... 1
ARTICLE II
PURCHASE AND SALE OF CERTIFICATES.............................. 1
SECTION 2.1 The Commitments; Percentages.............. 1
SECTION 2.2 Purchase Mechanics During Revolving
Period.................................. 2
ARTICLE III
INDEMNITY...................................................... 2
SECTION 3.1 Indemnity................................. 2
SECTION 3.2 Taxes..................................... 3
ARTICLE IV
REPRESENTATIONS AND WARRANTIES................................. 4
SECTION 4.1 Transferor................................ 4
SECTION 4.2 Purchasers................................ 5
ARTICLE V
CONDITIONS..................................................... 5
SECTION 5.1 Conditions to Initial Purchase............ 5
SECTION 5.2 Conditions to Each Purchase............... 8
ARTICLE VI
MISCELLANEOUS PROVISIONS....................................... 9
SECTION 6.1 Amendments................................ 9
SECTION 6.2 No Waiver, Remedies....................... 9
SECTION 6.3 Successors and Assigns; Assignments....... 10
SECTION 6.4 Survival of Agreement..................... 11
SECTION 6.5 Expenses; Further Indemnification......... 11
SECTION 6.6 Entire Agreement.......................... 12
SECTION 6.7 Notices................................... 12
SECTION 6.8 No Third-Party Beneficiaries.............. 13
SECTION 6.9 Severability of Provisions................ 13
SECTION 6.10 Counterparts.............................. 13
SECTION 6.11 Governing Law............................. 13
-i-
<PAGE>
SCHEDULE
SCHEDULE I Stated Amounts and Percentages
EXHIBITS
EXHIBIT A Form of Pooling and Servicing Agreement
EXHIBIT B Form of Purchase and Sale Agreement
EXHIBIT C Form of Rule 144A Investment Letter
-ii-
<PAGE>
This CERTIFICATE PURCHASE AGREEMENT, dated as of June 27, 1997 (this
"Agreement"), is made among WISCONSIN CIRCLE II FUNDING CORPORATION, a Delaware
corporation ("Transferor"), and the purchasers named on the signature pages of
this Agreement (together with their respective permitted assigns, the
"Purchasers").
BACKGROUND
1. Transferor will enter into (a) a Pooling and Servicing Agreement
substantially in the form of Exhibit A (the "Pooling Agreement") with HCFP
---------
Funding, Inc., a Delaware corporation, as servicer (in that capacity, together
with any successors in that capacity, "Servicer"), and First Bank National
Association, as trustee (in that capacity, together with any successors in that
capacity, the "Trustee"), and (b) a Purchase and Sale Purchase Agreement
substantially in the form of Exhibit B (the "Purchase Agreement") with
---------
HealthCare Financial Funding II, Inc., a Delaware corporation, as Seller.
Pursuant to the Pooling Agreement, Transferor will obtain the Series 1997-1,
Class A Certificates (the "Certificates"), which will represent fractional
undivided beneficial interests in the assets of the STL 1997-1 Trust (the
"Trust"), a trust to be organized pursuant to the Pooling Agreement.
2. Transferor wishes to sell the Certificates to the Purchasers and
obtain their commitment to purchase fractional undivided beneficial interests in
the assets of the Trust (each a "Trust Interest") that will be evidenced by the
Certificates. Subject to the terms and conditions of this Agreement, each
Purchaser is willing (a) to purchase a Certificate with an initial Stated Amount
in the amount set forth opposite its name on Schedule I to this Agreement and
(b) to agree to so make purchases of Trust Interests up to the Stated Amount (as
defined below) as set forth opposite its name on Schedule I.
ARTICLE I
DEFINITIONS
SECTION 1.1 Definitions. Capitalized terms used and not otherwise
-----------
defined herein have the meanings assigned to them in Appendix A to the Pooling
Agreement.
ARTICLE II
PURCHASE AND SALE OF CERTIFICATES
SECTION 2.1 The Commitments; Percentages. Subject to the terms and
----------------------------
conditions of this Agreement and the Pooling Agreement, each Purchaser agrees,
severally and for itself alone, upon Transferor's request, prior to the
expiration of the Revolving Period, to make purchases (each a "Trust Purchase")
of Trust Interests on each Subsequent Closing Date during the Revolving Period.
The Trust Purchases by the Purchasers shall be made ratably in accordance with
their respective Class Percentages; provided, that the failure of any Purchaser
to make any Trust Purchase shall not relieve
<PAGE>
any other Purchaser of its obligation to make Trust Purchases hereunder; and
provided further that the Purchasers shall not be obligated to make any Trust
Purchase with respect to any Purchased Receivable in an amount exceeding the
lesser of (i) $4,440,000 for any Receivable not primarily secured by real estate
and (ii) $6,600,000 for any Receivable primarily secured by real estate and (b)
eighty-eight percent (88%) of the outstanding principal amount of such
Receivable held in Trust (the "Base Amount"). No Purchaser shall, however, be
responsible for the failure of any other Purchaser to make any Trust Purchase.
Subject to and in accordance with the terms of this Agreement, the aggregate
principal amount of a Purchaser's investment represented by its Certificate may
be increased or decreased from time to time.
The initial Class Percentages of the initial Purchasers are set forth
opposite their names on Schedule I.
----------
SECTION 2.2 Purchase Mechanics During Revolving Period.
------------------------------------------
(a) Trust Purchases on the Initial Purchase Date shall be in such amount as
set forth on Schedule I hereto. Transferor shall give Purchasers not less than
two Business Days' prior notice of any Trust Purchases that Transferor wishes
the Purchasers to make on any Subsequent Closing Date during the Revolving
Period. Each such notice shall be irrevocable, shall refer to this Agreement
and shall specify (i) the aggregate purchase price for the requested Trust
Purchases (each of which shall be in a minimum amount of $500,000 (or in the
total unutilized amount of the various Purchasers' Stated Amounts, if less)) and
(ii) the applicable Subsequent Closing Date of the Trust Purchase. No requests
that the Purchasers make Trust Purchases shall be made by the Transferor on or
after the Purchase Termination Date.
(b) After receiving any notice given pursuant to subsection (a) and subject
--------------
to the conditions in Article V, each Purchaser shall make a Trust Purchase in
---------
the amount of its pro rata portion of aggregate Trust Purchases requested to be
made, ratably according to its Class Percentage, on the applicable Subsequent
Closing Date by wire transfer in Dollars of immediately available funds to
Trustee for deposit into the Purchase Account.
ARTICLE III
INDEMNITY
SECTION 3.1 Indemnity. If a Purchaser shall incur any losses, expenses
---------
or liabilities (including any interest paid to lenders of funds borrowed by it
to fund any Trust Purchase and any loss sustained in connection with the re-
deployment of such funds) as a result of the failure of a Trust Purchase to be
made on a date specified therefor in a notice delivered by Transferor pursuant
to Section 2.2 (other than any such failure resulting from the Purchaser's
-----------
default in the performance of its obligations hereunder), then, upon written
notice (which notice shall be signed by an officer of the Purchaser with
knowledge of and responsibility for such matters and shall set forth in
reasonable detail the basis for requesting the amounts) from the Purchaser to
Transferor and Servicer, additional amounts sufficient to indemnify the
Purchaser against the losses, expenses and liabilities, but not for any lost
profits or other consequential damages associated therewith, shall constitute
"Additional
2
<PAGE>
Amounts" for purposes of the Pooling Agreement, and the Purchaser shall be
entitled to receive these additional amounts, solely from amounts allocated
thereto and paid pursuant to the Pooling Agreement.
SECTION 3.2 Taxes.
-----
(a) Any and all payments made to each Purchaser under its Certificate shall
be made free and clear of and without deduction for any and all present or
future taxes, levies, imposts, duties, charges, fees, deductions or withholdings
of any nature and whatever called, by whomsoever, on whomsoever and wherever
imposed, levied, collected, withheld or assessed, other than taxes imposed on
all or part of the net income, profits or gains of that Purchaser (whether
worldwide, or only insofar as such income, profits or gains are considered to
arise in or to relate to a particular jurisdiction, or otherwise) (all the
nonexcluded taxes, levies, imposts, charges, deductions, withholdings and
liabilities being hereinafter referred to as "Taxes"). If Trustee or the Paying
Agent is required by law to deduct or withhold any Taxes from or in respect of
any sum payable or under any Certificate to a Purchaser, then the sum payable
shall be increased by the amount necessary to yield to such Purchaser (after
payment of all Taxes) an amount equal to the sum it would have received had no
such deductions or withholdings been made, and the additional amount shall
constitute "Additional Amounts" for purposes of the Pooling Agreement, and the
Purchaser shall be entitled to receive these additional amounts, solely from
amounts allocated thereto and paid pursuant to the Pooling Agreement.
(b) Whenever any Taxes are paid by Trustee pursuant to subsection (a), as
--------------
promptly as practicable thereafter Transferor shall send or cause to be sent to
the relevant Purchaser the original or a certified copy of an original official
receipt showing payment thereof (if any) or any other evidence of the payment as
may be available to Transferor through the exercise of its reasonable efforts.
If Trustee fails to pay any Taxes when due to the appropriate taxing authority
or fails to remit to the Purchaser the required receipts or other required
documentary evidence, the Purchaser shall be entitled to receive, solely from
amounts allocated with respect thereto and paid pursuant to the Pooling
Agreement, additional amounts necessary to indemnify it for any incremental
taxes, interest or penalties that may become payable by Purchaser as a result of
any such failure, and the amounts shall constitute "Additional Amounts" for
purposes of the Supplement, and the Purchaser shall be entitled to receive these
additional amounts, solely from amounts allocated thereto and paid pursuant to
the Supplement.
(c) On or before the date it becomes a party to this Agreement (and, so
long as it may properly do so, periodically thereafter, as requested by
Servicer, to keep forms up to date), each Purchaser, including any Assignee,
that is not a United States person (as defined in section 7701(a)(30) of the
Internal Revenue Code), shall deliver to Trustee any certificates, documents or
other evidence that shall be required by the Internal Revenue Code or Treasury
Regulations issued pursuant thereto to establish that, assuming the Certificates
are properly characterized as indebtedness for Federal income tax purposes, it
is exempt from existing United States Federal withholding (including backup
withholding) requirements, including (i) two original copies of Internal Revenue
Service Form 1001 or Form 4224 or successor applicable form, properly completed
and duly executed by the Purchaser or Assignee certifying that it is entitled to
receive payments under this Agreement or any Certificate without deduction or
withholding of any United States Federal income taxes, and (ii) an original copy
of Internal Revenue Service Form W-8 or W-9 or applicable successor
3
<PAGE>
form, properly completed and duly executed; provided, that if any Purchaser does
not comply with this subsection 3.2(c), amounts payable to such Purchaser under
-----------------
this Section 3.2 shall be limited to amounts that would have been payable under
-----------
this section if such Purchaser had so complied.
If at any time the Trustee or any Purchaser is required to pay any
additional amount pursuant to this Section 3.2, such Purchaser shall make all
reasonable efforts and take such other steps as may be reasonably available, so
that the payment, deduction or withholding would be reduced or the provisions of
Section 3.2 would no longer be applicable.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.1 Transferor. As of the Closing Date and the date of each
----------
purchase under Section 2.2, Transferor represents and warrants to the Purchasers
that each of its representations and warranties in the Pooling Agreement and the
Purchase Agreement is true and correct in all material respects, and that no
other material breach exists on the part of Seller or Servicer under those
Agreements, and further represents and warrants that:
(a) no Early Amortization Event or Unmatured Early Amortization Event
exists and the Delinquency Test is met;
(b) assuming the accuracy of each Purchaser's representations set out in
Section 4.2 and that no Purchaser (and no Person acting on any Purchaser's
- -----------
behalf) has made a general solicitation or general advertising within the
meaning of the Securities Act, the offer and sale of the Certificates in the
manner contemplated by this Agreement is a transaction exempt from the
registration requirements of the Securities Act, and the Pooling Agreement is
not required to be qualified under the Trust Indenture Act of 1939, as amended;
(c) Transferor has not dealt with any financial advisor (other than the
Purchasers), or other Person who may be entitled to any commission or
compensation in connection with the sale of the Certificates;
(d) no information supplied by or on behalf of Transferor to the Purchasers
in connection with the Transaction Documents contains any untrue statement of a
material fact or omits to state a material fact necessary to make the statements
contained herein or therein in light of the circumstances under which they were
made not misleading, or any of such information has been corrected in writing by
or on behalf of Transferor in writing delivered to Trustee, Servicer, and each
Purchaser, as applicable, sufficiently prior to the date such information
becomes material as to eliminate the effect of any prior inaccuracy or omission;
and
(e) the Certificates have been duly and validly authorized by Transferor
and, from and after the date on which the Certificates are executed by
Transferor and authenticated by the Trustee in accordance with the terms of the
Pooling Agreement and this Agreement and delivered to and paid for by the
Purchasers in accordance with the terms of this Agreement, will be validly
issued and
4
<PAGE>
outstanding and will constitute valid and legally binding obligations of the
Trust entitled to the benefits of the Pooling Agreement and this Agreement and
enforceable against the Trust in accordance with their terms.
SECTION 4.2 Purchasers. As of the Closing Date (or such later date on
----------
which it acquires its Certificate in accordance with Section 6.3), each
-----------
Purchaser represents and warrants (and each Assignee shall be deemed to
represent and warrant as of the date that its assignment becomes effective) that
(a) it is an "accredited investor" as that term is defined in any of
paragraphs (1), (2), (3) or (7) of Rule 501(a) under the Securities Act or a
"Qualified Institutional Buyer" under Rule 144A and Section 4(2) of the
Securities Act, and is not purchasing its Certificate with a view to making a
distribution thereof (within the meaning of the Securities Act);
(b) it (a) is not, and is not purchasing its Certificate directly or
indirectly on behalf of, or with the assets of, an ERISA plan;
(c) (i) No more than 100 Persons may be Certificateholders at any one time,
(ii) the Certificates shall not be registered under the Securities Act nor
listed on any exchange, (iii) if investment in this Certificate represents
substantially all of the value of the Purchaser's assets, then the investment is
not being made for the principal purpose of avoiding the 100 partner
representation of the private placement exemption to the "publicly traded
partnership rule" under Treasury Regulation 1-7704-1(h)(3);
(d) it confirms it has had the opportunity to request financial and other
information as it has deemed necessary in connection with its decision to
purchase the Certificates, and has received and carefully read and is familiar
with the information provided by the Transferor in such connection;
(e) it has such knowledge and experience in financial and business matters
that it is capable of evaluating the merits and risks of purchasing the
Certificates;
(f) the Certificates are being acquired solely for the Purchaser's own
account, for investment, and are not being purchased with a present view to or
for the resale, distribution, subdivision or fractionalization thereof; and the
Purchaser agrees that such Certificates will not be sold without redistribution
under the Securities Act or an exemption therefrom, and then solely in a
accordance with the terms of the Pooling Agreement; and
(g) this Agreement has been duly and validly authorized by the Purchasers
and will constitute the valid and legally binding obligation of the Purchasers,
enforceable against the Purchasers in accordance with its terms.
5
<PAGE>
ARTICLE V
CONDITIONS
SECTION 5.1 Conditions to Initial Purchase. The obligation of each
------------------------------
Purchaser to Purchase its Certificate shall be subject to the satisfaction of
the conditions precedent that,
(a) the conditions precedent specified in the Purchase Agreement (other
than those that relate to this Agreement) shall be satisfied;
(b) such Purchaser shall have received a duly executed and authenticated
Certificate registered in its name and in a Stated Amount equal to the amount
set out opposite its name on Schedule I to this Agreement;
(c) such Purchaser shall have received the initial installment of the
structuring fee set forth in the letter dated June 27, 1997, from CSFB to the
Servicer; and
(d) such Purchaser shall have received an original (except as indicated
below) counterpart of the following (each of which, if not in a form attached to
this Agreement, shall be in form and substance satisfactory to the Required
Person):
(i) the Pooling Agreement and the Purchase Agreement, each of
which shall be in full force and effect, and all actions required to be
taken under those documents in connection with the issuance of the
Certificates shall have been taken;
(ii) a certificate of the Secretary, or an Assistant Secretary,
of each of Transferor, Guarantor, Servicer and Seller with respect to:
(A) attached copies of resolutions of its Board of Directors
(or, if applicable, its managing body) then in full force and effect
authorizing the execution, delivery and performance of the Transaction
Documents,
(B) the incumbency and signatures of those of its officers
authorized to act with respect to the Transaction Documents, and
(C) attached copies of its certificate of incorporation and
by-laws (or, if applicable, its limited liability company operating
agreement);
(iii) a certificate of an Authorized Officer of Transferor as to
the satisfaction of the conditions precedent set forth in Section 5.2, and
-----------
a certificate of Transferor that the representations and warranties of the
Transferor set out in this agreement are true and correct in all material
respects as of the date of such initial purchase and that no Early
Amortization Event or Unmatured Early Amortization Event exists;
(iv) a certificate of an Authorized Officer of Seller and
Servicer as to the satisfaction of the conditions precedent set forth in
the Purchase Agreement and Pooling Agreement, respectively, and a
certificate of Seller and Servicer that the representations and
6
<PAGE>
warranties set out in the Purchase Agreement and Pooling Agreement,
respectively, are true and correct in all material respects as of the date
of such initial purchase and that no Early Amortization Event or Unmatured
Early Amortization Event exists;
(v) a certificate of an appropriate officer of Trustee stating
that the Pooling Agreement has been duly authorized, executed and delivered
by Trustee and the Certificates have been duly authenticated by Trustee in
accordance with the Pooling Agreement and an opinion of counsel to Trustee
as to related matters;
(vi) the Purchase Report for the Initial Purchase Date;
(vii) copies of each document delivered to Transferor by Seller
pursuant to Article IV of the Purchase Agreement, in form and substance
satisfactory to each Purchaser;
(viii) results of recent searches of the UCC filing records and
tax and ERISA and judgment lien records in each jurisdiction in which a
filing referred to in subsection (ix) is to be made for filings against
---------------
Seller (including any predecessors in interest to Seller going back five
years) and Transferor, showing no filings of record that cover any of the
Receivables or the other Transferred Assets other than (i) the financing
statements referred to in subsection (ix) (to the extent shown in the
---------------
searches) and (ii) any other filings as to which the Purchasers have
received signed UCC-3 termination statements or pay-off letters in form and
substance satisfactory to them;
(ix) confirmation satisfactory to the Purchasers that (x) the
following, as applicable, have been placed with Lexis Document Services or
another filing service selected by the Purchasers for filing, the filing to
occur on or before the Closing Date and (y) any filing fees and
indebtedness taxes necessary to perfect or protect true security interests
by means of such filings have been paid in full:
(A) UCC financing statements naming each Obligor, as
seller/debtor, and Seller, as secured party/purchaser, in each office
where the filing is necessary for the perfection of the sales or
pledges of Receivables and Related Assets by such Obligor to Seller;
(B) assignments of such existing UCC financing statements to
Transferor, as assignee of the secured party, and further to Trustee,
as further assignee of the secured party, in each office where the
filing is necessary for the perfection of the sales or pledges of
Receivables and Related Assets by each Obligor to Seller;
(C) UCC financing statements naming Seller, as seller/debtor,
and Transferor, as secured party/purchaser, in each office where the
filing is necessary for the perfection of the sales or contribution of
Receivables and Related Assets by Seller to Transferor;
7
<PAGE>
(D) assignments of such existing UCC financing statements to
Trustee, as assignee of the secured party, in each office where the
filing is necessary for the perfection of the sales of Receivables and
Related Assets by Seller to Transferor; and
(E) UCC financing statements naming Transferor, as
seller/debtor, and Trustee, as secured party/purchaser, in each office
where the filing is necessary for the perfection of the transfers of
Receivables and other Transferred Assets by Transferor to Trustee;
(x) opinions of counsel to Transferor as to certain corporate and
securities matters concerning Seller, Guarantor, Federal and state tax and
UCC matters, state licensing and tariffs, true sale and non-consolidation
issues, addressed to the Purchasers and Trustee, and in each case as to the
matters and in such form and substance as shall be reasonably satisfactory
to the Purchasers and Trustee;
(xi) evidence, reasonably satisfactory to the Purchasers, of the
payment of all taxes, fees and other governmental charges, if any,
incidental to the issuance of the Certificates and to the consummation of
the transactions contemplated hereunder and under the Pooling Agreement;
(xii) solvency certificates of the chief financial officer of
Seller and Guarantor, which certificate shall be addressed to the
Purchasers and shall be in form and substance reasonably satisfactory to
the Purchasers;
(xiii) such sublicenses and assignments as the Purchasers shall
require with regard to all computer and data recovery software used by
Servicer or Seller in connection with the servicing of the Transferred
Assets, which sublicenses and assignments will permit any substitute
Servicer to use such software; and
(xiv) any other information, certificates, opinions and
documents as the Purchasers reasonably may request.
If the conditions specified above have not been fulfilled on the date
hereof, any condition specified in this Agreement shall not have been fulfilled
when and as required in this Agreement or waived by the Purchasers, in each case
a Purchaser's obligations to purchase the Certificates pursuant to this
Agreement may be terminated by notice to Transferor. Nothing in this paragraph
shall operate to relieve Transferor from any of its obligations hereunder or
otherwise waive any of the Purchasers' rights against Transferor.
SECTION 5.2 Conditions to Each Purchase. The obligation of each
---------------------------
Purchaser to make any Trust Purchase on any day (including those comprising the
initial Purchase) shall be subject to the Trustee's receipt of the Purchase
Report for that day and to the conditions precedent that on the date of the
Trust Purchase, before and after giving effect thereto and to the application of
any proceeds therefrom, the following statements shall be true:
8
<PAGE>
(a) the representations and warranties of Transferor set out in this
Agreement are true and accurate in all material respects as of that date with
the same effect as though made on that date (unless specifically stated to
relate to an earlier date);
(b) the funded principal amount of its Certificate, after giving effect to
the Trust Purchase, does not exceed its Class Percentage of an amount equal to
88% of the Unpaid Balance of the Eligible Receivables held in the Trust, and the
cumulative amount funded under its Certificate will not thereby exceed the
Stated Amount of such Certificate;
(c) the Seller has satisfied the conditions for the sale of Receivables
under the Purchase Agreement;
(d) no Unmatured Early Amortization Event or Early Amortization Event has
occurred and is continuing;
(e) no event which would become a Bankruptcy Event under subsection (a) of
the definition thereof with the passage of time has occurred and is continuing;
and
(f) the Purchase Termination Date has not occurred.
The giving of any notice pursuant to Section 2.2(a) shall constitute a
--------------
representation and warranty by Transferor that the foregoing statements are
true.
ARTICLE VI
MISCELLANEOUS PROVISIONS
SECTION 6.1 Amendments. This Agreement may be amended, modified or
----------
waived in a writing agreement among Transferor and the Required Person;
provided, however, that no amendment modification, waiver or consent shall (a)
decrease in any manner the amount of, or delay the timing of, any allocation,
payment or distribution in respect of any Certificate without the prior written
consent of each Purchaser affected thereby, (b) amend, modify or waive any
provision of this Agreement that requires the approval or consent of a specified
percentage of Purchasers without the prior written consent of that percentage of
Purchasers, (c) amend, modify or waive the provisions of this section with
respect to the rights of any Purchaser, or the Class Percentage of any
Purchaser, without the consent of that Purchaser, (d) waive any Early
Amortization Event arising from a Bankruptcy Event with respect to Transferor or
Seller without the consent of each Purchaser, (e) amend or modify the Class
Percentage of any Purchaser, without its prior written consent or (f) waive any
of the requirements hereunder that the interests of Trustee in the Receivables
and the other Transferred Assets be perfected by appropriate Public Notice
filings without the prior written consent of each Purchaser. Each Purchaser
shall be bound by any modification, waiver or consent authorized by this
section.
SECTION 6.2 No Waiver, Remedies. Any waiver, consent or approval given
-------------------
by any party hereto shall be effective only in the specific instance and for the
specific purpose for which
9
<PAGE>
given, and no waiver by a party of any breach or default under this Agreement
shall be deemed a waiver of any other breach or default. No failure on the part
of any party hereto to exercise, and no delay in exercising, any right hereunder
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right hereunder, or any abandonment or discontinuation of steps to enforce
the right, power or privilege, preclude any other or further exercise thereof or
the exercise of any other right. No notice to or demand on any party hereto in
any case shall entitle such party to any or further notice or demand in the
same, similar or other circumstances. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law.
SECTION 6.3 Successors and Assigns; Assignments.
-----------------------------------
(a) This Agreement shall be binding upon, and inure to the benefit of
Transferor and the Purchasers and their respective successors and assigns;
provided that Transferor may not assign its rights or obligations hereunder or
in connection herewith or any interest herein (voluntarily, by operation of law
or otherwise) without the prior written consent of all the Purchasers; and
provided further, that no Purchaser may transfer, pledge, assign, sell
participations in or otherwise encumber its rights or obligations hereunder or
any interest herein except as permitted under this section.
(b) Subject to the terms of Section 6.3(e), any Purchaser may at any time
--------------
assign to any Permitted Transferee or to one or more banks or institutional
investors (each, an "Assignee") all or any part of its participating interests
in all or any portion of its Certificate and its obligations hereunder (its
"Credit Exposure"); provided that (i) unless assigned to an Affiliate of the
Purchaser or to a Permitted Transferee, it assigns all of its Credit Exposure or
a portion of its Credit Exposure in a Stated Amount not less than $5,000,000,
and (ii) if such Assignee is not a United States person (as defined in section
7701(a)(30) of the Internal Revenue Code), such Assignee shall satisfy the
requirements of Section 4.2, provided, that if such Assignee thereafter fails to
------------
comply with the requirements of Section 4.2, amounts payable to it under Section
----------- -------
4.2 shall be limited to amounts that would be payable if such Assignee had
- ---
complied with Section 4.2, and (iv) such Assignee shall meet the requirements
----------- ----
for reregistration of a Certificate in its name under the Pooling Agreement.
Transferor and the Purchasers agree to extend the rights and benefits with
respect to Transferor under this Agreement to the Assignee to the extent the
Assignee would have had if it were a Purchaser that was an original signatory to
this Agreement; provided, that the parties hereto shall be entitled to continue
to deal solely and directly with the assignor Purchaser in connection with the
interests so assigned to the Assignee until the assignment agreement, as
described above, shall have been delivered to the Transfer Agent and Registrar
by the Purchaser and the Assignee and the assignment shall have become
effective. Upon the effective assignment of its Credit Exposure, the Purchaser
shall be relieved of its obligations hereunder to the extent of the assignment.
(c) The sale or assignment by a Purchaser of any Credit Exposure to any
Assignee (each, a "Transferee") shall not be effective until it has agreed to be
bound by the provisions of this Agreement and the Pooling Agreement. Transferor
authorizes the Purchasers to disclose to any Transferee and any prospective
Transferee any and all information in their possession concerning Transferor or
Seller in connection with the Transferee's credit evaluation of the Program
prior to entering into this Agreement; provided, that, such Assignee agrees, in
a writing reasonably
10
<PAGE>
satisfactory to the Seller, to use such information only in connection with such
Assignee's decision to purchase all or any part of a Certificate and to
otherwise keep such information confidential.
(d) Notwithstanding any other provision set forth in this Agreement, the
Purchasers may at any time create a security interest in all or any portion of
their rights under this Agreement and the Certificates in favor of any Federal
Reserve Bank in accordance with Regulation A of the Board of Governors of the
Federal Reserve System.
(e) No transfer, assignment or other conveyance of, or sale of any Credit
Exposure of a Purchaser in, a Certificate shall be made unless, after giving
effect thereto, there shall be no more than [--] Private Holders of Subject
Instruments, as reasonably determined by Transferor. Any attempted transfer,
assignment, conveyance, participation or subdivision in contravention of the
preceding restrictions, as reasonably determined by the Transferor, shall be
void ab initio and the purported transferor, seller or subdivider of such
Certificate shall continue to be treated as the Certificateholder of any such
Certificate for all purposes of this Agreement.
(f) Each Purchaser claiming increased amounts described in Sections 3.1,
------------
3.2 or 6.5 hereof shall furnish to the Trustee, any Paying Agent, Servicer and
- --- ---
Transferor a certificate setting forth in reasonable detail the basis and amount
of each request by such Purchaser for certificate will be prepared in accordance
with the requirements of such Section (if any). Determinations by an Purchaser
of any increased amounts referred to in such Sections shall be conclusive,
absent demonstrable error. Each Purchaser shall promptly notify, the Trustee,
Servicer and Transferor of the occurrence of any event of which such Purchaser
is aware that would be likely to result in a demand for compensation pursuant to
Section 3.1, 3.2 or 6.5 hereof.
- ----------- --- ---
SECTION 6.4 Survival of Agreement. All covenants, agreements,
---------------------
representations and warranties made herein and in the Certificates delivered
pursuant hereto shall survive the making and the repayment of the Trust
Purchases and the execution and delivery of this Agreement and the Certificates
and shall continue in full force and effect until all obligations have been paid
in full and all commitments of the Purchasers hereunder have been terminated.
In addition, the obligations of Transferor under Sections 3.1, 3.2 and 6.5
------------ --- ---
hereof shall survive the termination of this Agreement.
SECTION 6.5 Expenses; Further Indemnification. Transferor shall pay on
---------------------------------
demand (a) all reasonable out-of-pocket fees and expenses (including reasonable
attorneys' fees and expenses) of the Purchasers incurred in connection with the
preparation, execution, delivery, administration, amendment, modification and
waiver of the Transaction Documents and the making and repayment of the Trust
Purchases, including any Servicer or collection agent fees paid to any third
party for services rendered to the Purchasers in collecting the Receivables and
(b) all reasonable out-of-pocket fees and expenses of the Purchasers (including
reasonable attorneys' fees and expenses of their counsel) incurred in connection
with the enforcement of the Transaction Documents against Transferor in
connection with any workout or restructuring of the Transaction Documents
provided that the sum of such amounts may not exceed $75,000 with respect to
initial Closing and the initial Purchase hereunder. In addition, Transferor
will pay any and all stamp and other taxes and fees payable or determined to be
payable in connection with the execution, delivery, filing, recording or
enforcement of this Agreement or any payment made under the Transaction
Documents, and hereby indemnifies and saves the Purchasers harmless from and
against any and all liabilities with respect to
11
<PAGE>
or resulting from any delay in paying or omission to pay the taxes and fees.
Transferor agrees to reimburse and indemnify each Purchaser and their respective
officers, directors, shareholders, controlling Persons, employees and agents
(collectively, the "Indemnitees") from and against any and all actions,
judgments, costs, expenses or disbursements of whatsoever kind or nature that
may be imposed on, asserted against or incurred or suffered by the Purchasers
(including fees and expenses of legal counsel, accountants and experts) in any
way relating to or arising out of the acts, errors or omissions of the
Transferor under any Transaction Document. Additional amounts sufficient to
indemnify the Purchasers or other Indemnitees under this Section 6.5 shall
-----------
constitute "Additional Amounts" for purposes of the Pooling Agreement, and the
Purchasers or other Indemnities shall be entitled to receive these additional
amounts, solely from amounts allocated thereto and paid pursuant to the Pooling
Agreement.
Notwithstanding the foregoing (and with respect to clause (x) below,
----------
without prejudice to the rights that an Indemnitee may have pursuant to the
other provisions of the Transaction Documents), in no event shall any Indemnitee
be indemnified against any amounts (w) resulting from gross negligence or
willful misconduct on the part of such Indemnitee (or any of its officers,
directors, employees, affiliates or agents) or the failure of such Indemnitee to
perform its obligations under the Transaction Documents, (x) to the extent they
include amounts in respect of Receivables and reimbursement therefor that would
constitute credit recourse to Transferor, Seller or Servicer for the amount of
any Receivable or Related Transferred Asset not paid by the related Obligor or
(y) to the extent they are or result from lost profits or other consequential
damages.
If for any reason the indemnification provided in this section is
unavailable to an Indemnitee or is insufficient to hold it handless, then
Transferor shall contribute to the amount paid by the Indemnitee as a result of
any loss, claim, damage or liability in a proportion that is appropriate to
reflect not only the relative benefits received by the Indemnitee on the one
hand and Transferor on the other hand, but also the relative fault of the
Indemnitee (if any), Transferor and any other relevant equitable considerations;
provided that the Transferor shall not, and shall not be obligated to, pay any
amount pursuant to this Section unless and to the extent that the Transferor has
funds available to pay such amounts or funds are allocated thereafter to the
Transferor and there shall be no recourse to Transferor for all or any part of
any amounts payable pursuant to this section if they are at any time
insufficient to make all or part of any such payments. Any amount which
Transferor does not pay pursuant to the operation of the preceding sentence
shall not constitute a claim (as defined in (S) 101 of the Bankruptcy Code)
against or corporate obligation of Transferor for any such insufficiency.
SECTION 6.6 Entire Agreement. This Agreement, together with the
----------------
documents delivered pursuant to Section 5.1 and the other Transaction Documents,
including the exhibits and schedules thereto, contains a final and complete
integration of all prior expressions by the parties hereto with respect to the
subject matter hereof and shall constitute the entire agreement among the
parties hereto with respect to the subject matter hereof, superseding all
previous oral statements and other writings with respect thereto.
SECTION 6.7 Notices. All communications hereunder shall be in writing
-------
and shall be deemed to have been duly given if personally delivered, sent by
overnight courier or mailed by registered mail, postage prepaid and return
receipt requested, or transmitted by facsimile transmission and confirmed by a
similar mailed writing to any party at the address for that party set forth (a)
on
12
<PAGE>
the signature page to this Agreement or (b) to another address as that party
may designate in writing to the Purchasers and Transferor.
SECTION 6.8 No Third-Party Beneficiaries. Nothing expressed herein is
----------------------------
intended or shall be construed to give any Person (other than the parties
hereto, and Assignees described in Section 6.3 ) any legal or equitable right,
remedy or claim under or in respect of this Agreement.
SECTION 6.9 Severability of Provisions. Any covenant, provision,
--------------------------
agreement or term of this Agreement that is prohibited or is held to be void or
unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective
to the extent of the prohibition or unenforceability without invalidating the
remaining provisions of this Agreement.
SECTION 6.10 Counterparts. This Agreement may be executed in any number
------------
of counterparts (which may include facsimile) and by the different parties
hereto in separate counterparts, each of which when so executed shall be deemed
to be an original, and all of which together shall constitute one and the same
instrument.
SECTION 6.11 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
-------------
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
13
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their duly authorized officers and delivered as of the day and
year first above written.
WISCONSIN CIRCLE II FUNDING CORPORATION,
as Transferor
By: /s/ Edward P. Nordberg, Jr.
----------------------------
Its: Executive Vice President
--------------------------
Address: --------------------------
--------------------------
Attention:
--------------------------
Telephone:
--------------------------
Facsimile:
--------------------------
CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL, LLC, as a
Purchaser
By: /s/ David Arzi
---------------------------------
Its: Vice President
--------------------------
Address: 11 Madison Avenue
New York, New York 10010
Attention:
--------------------------
Telephone:
--------------------------
Facsimile:
--------------------------
14
<PAGE>
SCHEDULE I
to Certificate Purchase Agreement
Series 1997-1, Class A
AMOUNT OF EACH INITIAL PURCHASER'S CERTIFICATE
----------------------------------------------
Purchaser Stated Amount of Certificate
--------- ----------------------------
Credit Suisse First Boston Mortgage Capital, LLC $50,000,000.00
Class Percentage
----------------
Credit Suisse First Boston Mortgage Capital, LLC 100%
<PAGE>
EXHIBIT A
to Certificate Purchase Agreement
Series 1997-1, Class A
FORM OF POOLING AND SERVICING AGREEMENT
---------------------------------------
<PAGE>
EXHIBIT B
to Certificate Purchase Agreement
Series 1997-1, Class A
FORM OF PURCHASE AND SALE AGREEMENT
-----------------------------------
<PAGE>
EXHIBIT C
to Certificate Purchase Agreement
Series 1997-1, Class A
FORM OF RULE 144A INVESTMENT LETTER
-----------------------------------
QUALIFIED INSTITUTIONAL BUYER STATUS UNDER SEC RULE 144A
--------------------------------------------------------
The undersigned hereby certifies as follows in connection with its
acquisition of the Series 1997-1 Class A Certificates (the "Class A
Certificates") of the _________________ trust (the "Trust") issued pursuant to a
Pooling and Servicing Agreement dated as of June __, 1997 among _____________
Corporation as Transferor, HealthCare Financial Partners, Inc., as Servicer and
___________ as Trustee (the "Pooling Agreement")(capitalized terms used herein
and not otherwise defined herein shall have such meaning as defined in the
Pooling Agreement):
1. As indicated below, the undersigned is the President, Chief Financial
Officer, Senior Vice President or other executive officer of the
Buyer. The Buyer is executing and delivering a Certificate Purchase
Agreement with this letter.
2. The Buyer understands that the offering and sale of its interests
under the Pooling Agreement and the Class A Certificate have not been
and will not be registered under the Securities Act of 1933, as
amended, and have not and will not be registered or qualified under
any applicable "blue sky" law, and that the offering and sale of the
Class A Certificates have not been reviewed by, passed on or submitted
to any federal or state agency or commission, securities exchange or
other regulatory body. The Buyer will be purchasing the Class A
Certificates for the Buyer's own account, without a view to any
distribution, resale or other transfer thereof except as contemplated
in the following sentence. The Buyer will not resell or otherwise
transfer any of the Class A Certificates except in a transaction that
complies with Section 6.3 of each of the Certificate Purchase
Agreement and the Pooling Agreement and which is a transaction exempt
from the registration requirements of the Securities Act of 1933, as
amended, and applicable state securities or "blue sky" laws.
The Buyer understands that the Class A Certificate will bear a legend
to substantially the following effect:
THIS CLASS A CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR ANY STATE
SECURITIES LAWS. BY ITS ACCEPTANCE HEREOF, EACH INVESTOR
REPRESENTS AND AGREES THAT IT IS ACQUIRING THIS CLASS A
CERTIFICATE FOR ITS OWN ACCOUNT (AND NOT FOR THE ACCOUNT OF
OTHERS) AND NOT WITH A VIEW TO, OR FOR SALE IN CONNECTION WITH,
THE PUBLIC DISTRIBUTION HEREOF OR THEREOF AND THAT THIS CLASS A
<PAGE>
CERTIFICATE MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED, EXCEPT IN COMPLIANCE WITH THE REGISTRATION
PROVISIONS OF THE 1933 ACT AND ANY APPLICABLE PROVISIONS UNDER
STATE SECURITIES LAWS OR PURSUANT TO AN AVAILABLE EXEMPTION FROM
SUCH PROVISIONS. THE TRANSFER OF THIS CLASS A CERTIFICATE IS
SUBJECT TO CERTAIN CONDITIONS SET FORTH IN SECTION 6.3 OF THE
CERTIFICATE PURCHASE AGREEMENT AND SECTION 6.3 OF THE Pooling
Agreement.
THIS CLASS A CERTIFICATE MAY HAVE ORIGINAL ISSUE DISCOUNT ("OID").
CONTACT _____________________, FOR INFORMATION CONCERNING THE ISSUE
PRICE, AMOUNT OF OID, ISSUE DATE AND YIELD TO MATURITY OF THIS CLASS A
CERTIFICATE.
3. In connection with purchases by the Buyer, the Buyer is a "qualified
institutional buyer" as that term is defined in Rule 144A under the
Securities Act of 1933 ("Rule 144A") because (i) the Buyer owned
and/or invested on a discretionary basis $__________/1/ in securities
(except for the excluded securities referred to below) as of the end
of the Buyer's most recent fiscal year (such amount being calculated
in accordance with Rule 144A) and (ii) the Buyer satisfies the
criteria in the category marked below.
___ Corporation, Etc. The Buyer is a corporation (other than a bank,
-----------------
savings and loan association or similar institution),
Massachusetts or similar business trust, partnership, or
organization described in Section 501(c)(3) of the Internal
Revenue Code.
___ Bank. The Buyer (a) is a national bank or banking institution
----
organized under the laws of any United States State ("State"),
territory or the District of Columbia, the business of which is
substantially confined to banking and is supervised by the State
or territorial banking commission or similar official or is a
foreign bank or equivalent institution, and (b) has an audited
net worth of at least $25,000,000 as demonstrated in its latest
annual financial statements, a copy of which is attached hereto.
----------------------------------
___ Savings and Loan. The Buyer (a) is a savings and loan
----------------
association, building and loan association, cooperative bank,
homestead association or similar institution, which is supervised
and examined by a State or Federal authority having supervision
over any such institutions or is a foreign savings and loan
association or equivalent institution and (b) has an
audited net worth of at least $25,000,000 as demonstrated in its
latest annual financial statements.
- ----------------
/1/ Buyer must own and/or invest on a discretionary basis at least $100,000,000
in securities unless Buyer is a dealer, and, in that case, Buyer must
own and/or invest on a discretionary basis at least $10,000,000 in
securities.
<PAGE>
___ Broker-Dealer. The Buyer is a dealer registered pursuant to
-------------
Section 15 of the Securities Exchange Act of 1934.
___ Insurance Company. The Buyer is an insurance company whose
-----------------
primary and predominant business activity is the writing of
insurance or the reinsuring of risks underwritten by insurance
companies and which is subject to supervision by the insurance
commissioner or a similar official or agency of a State or
territory or the District of Columbia.
___ State or Local Plan. The Buyer is a plan established and
-------------------
maintained by a State, its political subdivisions, or any agency
or instrumentality of the State or its political subdivisions,
for the benefit of its employees.
___ ERISA Plan. The Buyer is an employee benefit plan within the
----------
meaning of Title I of the Employee Retirement Income Security Act
of 1974.
___ Investment Adviser. The Buyer is an investment adviser
------------------
registered under the Investment Advisers Act of 1940.
___ SBIC. The Buyer is a Small Business Investment Company licensed
----
by the U.S. Small Business Administration under Section 301(c) or
(d) of the Small Business Investment Act of 1958.
___ Business Development Company. The Buyer is a business
----------------------------
development company as defined in Section 202(a)(22) of the
Investment Advisers Act of 1940.
___ Trust Fund. The Buyer is a trust fund whose trustee is a bank or
----------
trust company and whose participants are exclusively (a) plans
established and maintained by a State, its political
subdivisions, or any agency or instrumentality of the State or
its political subdivisions, for the benefit of its employees, or
(b) employee benefit plans within the meaning of Title I of the
Employee Retirement Income Security Act of 1974, but is not a
trust fund that includes as participants individual retirement
accounts or H.R. 10 plans.
___ Investment Company. The Buyer is an investment company
------------------
registered under the Investment Company Act of 1940, and (ii) as
marked below, the Buyer alone, or the Buyer's Family of
Investment Companies, owned at least $100,000,000 in securities
(other than the excluded securities referred to below) as of the
end of the Buyer's most recent fiscal year. For purposes of
determining the amount of securities owned by the Buyer or the
Buyer's Family of Investment Companies, the cost of such
securities was used.
<PAGE>
____ The Buyer owned $__________ in securities (other than the
excluded securities referred to below) as of the end of the
Buyer's most recent fiscal year (such amount being calculated in
accordance with Rule 144A).
____ The Buyer is part of a Family of Investment Companies which owned
in the aggregate $__________ in securities (other than the
excluded securities referred to below) as of the end of the
Buyer's most recent fiscal year (such amount being calculated in
accordance with Rule 144A).
The term "Family of Investment Companies" as used herein means
------------------------------
two or more registered investment companies (or series thereof) that
have the same investment adviser or investment advisers that are
affiliated (by virtue of being majority owned subsidiaries of the same
parent or because one investment adviser is a majority owned
subsidiary of the other).
4. The term "securities" as used herein does not include (i) securities
---------- ----------------
of issuers that are affiliated with the Buyer, (ii) securities that
are part of an unsold allotment to or subscription by the Buyer, if
the Buyer is a dealer, (iii) bank deposit notes and certificates of
deposit, (iv) loan participations, (v) repurchase agreements, (vi)
securities owned but subject to a repurchase agreement and (vii)
currency, interest rate and commodity swaps.
5. For purposes of determining the aggregate amount of securities owned
and/or invested on a discretionary basis by the Buyer, the Buyer used
the cost of such securities to the Buyer and did not include any of
the securities referred to in the preceding paragraph. Further, in
determining such aggregate amount, the Buyer may have included
securities owned by subsidiaries of the Buyer, but only if such
subsidiaries are consolidated with the Buyer in its financial
statements prepared in accordance with generally accepted accounting
principles and if the investments of such subsidiaries are managed
under the Buyer's direction. However, such securities were not
included if the Buyer is a majority-owned, consolidated subsidiary of
another enterprise and the Buyer is not itself a reporting company
under the Securities Exchange Act of 1934.
6. The Buyer acknowledges that it is familiar with Rule 144A and
understands that the seller to it and other parties related to the
Class A Certificates are relying and will continue to rely on the
statements made herein because one or more sales to the Buyer may be
in reliance on Rule 144A.
7. The Buyer makes the representation contained in the following
sentence, and agrees that the Class A Certificate may be transferred
to a Person only if the transfer and holding of such Class A
Certificates would be exempt from the prohibited transaction sanctions
of ERISA (as defined below) and the Code (as defined below). To that
end, at least one of the following statements is an accurate
representation as to each source
<PAGE>
of funds (a "Source") to be used by the Buyer to make its investment
under the Pooling Agreement and to purchase its Class A Certificate:
(i) if the Buyer is an insurance company, the Source is any of
(1) funds held by the Buyer in its general account which the Buyer
reasonably believes do not constitute "plan assets" of an employee
benefit plan subject to the fiduciary responsibility provisions of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
or Section 4975 of the Internal Revenue Code of 1986, as amended (the
"Code"), or of a governmental plan as defined in Section 3(32) of
ERISA subject to any federal, state or local law which is to a
material extent similar to the foregoing provisions of ERISA or the
Code, or (2) funds held by the Buyer in its general account with
respect to which the Buyer reasonably believes the requirements of
Section I of Prohibited Transaction Class Exemption 95-60, 60 Fed.
Reg. 3592 (1995), will be satisfied at all times with respect to the
Buyer's investment under the Pooling Agreement and purchase of its
Class A Certificate, or (3) an insurance company pooled separate
account described in Prohibited Transaction Exemption ("PTE") 90-1 and
no employee benefit plan or plans maintained by the same employer or
employee organization beneficially owns or will own more than 10% of
all assets allocated to such pooled separate account; or
(ii) the Source is a bank collective investment fund (as defined
in Section IV of PTE 91-38) and no employee benefit plan or plans
maintained by the same employer or employee organization beneficially
owns or will own more than 10% of all assets allocated to such
collective investment fund; or
(iii) the Source is a governmental plan that is covered neither
by ERISA nor Section 4975 of the Code and neither the purchase of, nor
the subsequent holding of, the Class A Certificate will result in,
arise from, constitute or involve a transaction that is prohibited
under applicable state or local law; or
(iv) the Source does not include assets of any employee benefit
plan that is subject to Title I of ERISA.
8. The Buyer will notify each of the parties to which this certification
is made of any changes in the information and conclusions herein.
Until such notice is given, the Buyer's purchase of the Class A
Certificates will constitute a reaffirmation of this certification as
of the date of such purchase.
9. The Buyer has provided with this certification a completed IRS Form W-
8 or W-9. The undersigned agrees to notify the Trustee at least
thirty (30) days prior to the date that the form relied upon becomes
obsolete and agrees to submit a new certificate as to its status prior
to the obsolescence of the old form. The undersigned understands that
this certificate and the aforementioned IRS Forms may be disclosed to
the Internal Revenue Service by the Trustee or the Servicer and any
false statement contained therein could be punishable by fines,
imprisonment or both.
<PAGE>
10. Under penalties of perjury, I declare that I have examined this
certificate and to the best of my knowledge and belief it is true,
correct and complete and will further declare that I will inform the
Trustee of any change in the information provided above, and, if
applicable, I further declare that I have the authority/*/ to sign
this document.
_____________________________________
Print Name of Buyer
By: _____________________________________
Name: _________________________
Title: _________________________
Date: _________________________
<PAGE>
EXHIBIT 10.18
APPENDIX A
DEFINITIONS
A. Defined Terms. As used in the Transaction Documents, unless otherwise
-------------
defined therein:
"Additional Amounts" means all amounts payable to the Holders pursuant
to Sections 3.1 and 6.5 of the Certificate Purchase Agreement; provided
that "Additional Amounts" shall not include principal or interest on the
Series 1997-1 Certificates.
"Adverse Claim" means any claim of ownership interest or any mortgage,
deed of trust, pledge, hypothecation, assignment, deposit arrangement,
encumbrance, lien (statutory or other) or other security interest (other
than, with respect to any Purchased Asset, (i) any mortgage, deed of trust,
pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien
(statutory or other) or other security agreement in favor of any Person who
prior to the date of the Purchase of such Purchased Asset has subordinated
its interest in such Purchased Asset to the interest of Transferor therein
pursuant to a written subordination agreement in form and substance
satisfactory to the Required Person or (ii) in the event such Purchased
Asset is a Receivable owing from a Governmental Authority, the right of
such Governmental Authority to offset against such Receivable, but only
prior to the time such Governmental Authority actually offsets against such
Receivable or notifies Seller or Servicer of its intent to do so).
"Affiliate" means, with respect to a Person, any other Person directly
or indirectly controlling, controlled by or under common control with such
Person. As used in this definition of "Affiliate", the term "control"
means the power, directly or indirectly, to direct or cause the direction
of the management and policies of a Person, whether through the ownership
of such Person's voting securities, by contract or otherwise, and the terms
"affiliated," "controlling" and "controlled" have the meanings correlative
to the term "control."
"Allocable Funds" means the funds which are deposited into the Master
Collection Account.
"Amortization Commencement Date" means the expiration of the Revolving
Period.
"Amortization Period" means the period (i) beginning on the earlier of
(1) June 27, 1999, (2) the date the Trust has cumulatively acquired
$56,820,000 in Eligible Receivables, or (3) the date Class A
Certificateholders have in aggregate funded a cumulative Invested Amount of
$50,000,000.
"Applicant" is defined in Section 6.7 of the Pooling Agreement.
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"Authorized Newspaper" means a newspaper of general circulation in the
Borough of Manhattan, The City of New York, printed in the English language
and customarily published on each Business Day, whether or not published on
Saturdays, Sundays and holidays.
"Authorized Officer" means, with respect to Transferor, Servicer or
Seller, the Chief Executive Officer, the President, the Treasurer, the
Chief Financial Officer, any Vice President and any Assistant Treasurer,
and with respect to the Trustee, any Responsible Officer.
"Available Final Distribution Amount" means with respect to any
Series, the amount that would be available in the Master Collection Account
on the Final Scheduled Payment Date for the Series for distribution to the
Certificateholders of such Series.
"Bankruptcy Code" means the United States Bankruptcy Code of 1978 (11
U.S.C. (S)(S)101 et seq.).
"Bankruptcy Event" means, for any Person, any of the following events:
(a) a case or other proceeding shall be commenced, without the
application or consent of such Person, in any court, seeking the
liquidation, reorganization, debt arrangement, dissolution, winding up or
composition or readjustment of debts of such Person, the appointment of a
trustee, receiver, custodian, liquidator, assignee, sequestrator or the
like for such Person or any substantial part of its assets, or any similar
action with respect to such Person under any law relating to bankruptcy,
insolvency, reorganization, winding up or composition or adjustment of
debts, and such case or proceeding shall continue undismissed, or unstayed
and in effect, for a period of 60 days, or
(b) such Person shall commence a voluntary case or other proceeding
under any applicable bankruptcy, insolvency, reorganization, debt
arrangement, dissolution or other similar law now or hereafter in effect,
or shall consent to the appointment of or taking possession by a receiver,
liquidator, assignee, trustee, custodian, sequestrator or the like, for
such Person or any substantial part of its property, or shall make any
general assignment for the benefit of creditors, or shall fail to, or admit
in writing its inability to, pay its debts generally as they become due.
"Bankruptcy Opinion" means (i) with respect to any Series, the Opinion
of Counsel regarding true sale and substantive consolidation issues
rendered in connection with the original issuance of such Series, and (ii)
with respect to any other action, an Opinion of Counsel substantially in
the form of the opinion referred to in clause (i) above.
"Base Amount" is defined in Section 2.1 of the Certificate Purchase
Agreement.
"Business Day" means any day other than a Saturday, Sunday or public
holiday under the laws of the State of New York or State of Maryland or
other day on which banking institutions are authorized or obligated to
close in the Borough of Manhattan in the City of New York in the State of
New York or in the City of Chevy Chase in the State of Maryland.
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"Buyer" is defined in the preamble to the Purchase Agreement.
"Calculation Period" means a calendar month.
"Carrying Cost Account" is defined in Section 4.2 of the Pooling
Agreement.
"Carrying Costs" means, for any period, (a) the aggregate Servicing
Fee for the period in the applicable amount provided for in Section 3.4 of
the Pooling Agreement including reasonable and customary Servicing
Advances, (b) interest or yield payable with respect to the Class A
Certificates for that period, (c) the operating expenses described in
Section 4.2(ii) of the Pooling Agreement for the period and (d) other fees,
costs and expenses incurred by Transferor and Trustee for the period and
paid to Persons other than Related Persons in connection with their duties
under the Transaction Documents (in the case of Trustee, to the extent not
included in the Servicing Fee).
"Certificate" means any Investor Certificate or the Transferor
Certificate.
"Certificate Purchase Agreement" means the Certificate Purchase
Agreement (Series 1997-1, Class A) dated as of the Closing Date between
Transferor and CS First Boston Mortgage Capital, LLC, as Purchaser.
"Certificate Register" means the register maintained pursuant to
Section 6.3 of the Pooling Agreement.
"Certificateholder" means the Person in whose name a Certificate is
registered in the Certificate Register.
"Class" or "Class of Certificates" means the Class A Certificates or
the Transferor Certificate, as the context requires.
"Class A Certificate" is defined in Section 6.1 of the Pooling
Agreement. Each Class A Certificate shall be substantially in the form of
Exhibit B to the Pooling Agreement.
"Class A Certificate Spread" means with respect to the Class A
Certificates, 3.75% per annum; provided that at any time that an Unmatured
Early Amortization Event or an Early Amortization Event has occurred and is
continuing, "Class A Certificate Spread" means with respect to the Class A
Certificates, 5.75% per annum.
"Class A Invested Amount" means, at any time, the sum of the purchase
prices paid for Class A Purchases made at or prior to that time, reduced
(but not below zero) by the aggregate amount of all distributions that have
been made to the Holders of the Class A Certificates on account of
principal.
"Class A Purchases" means purchases made in respect of Class A
Certificates pursuant to the Class A Certificate Purchase Agreement.
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<PAGE>
"Class A Stated Amount" means as to any Class A Certificate, the
initial maximum principal amount that may be required to be funded by the
Holder of such Certificate on a cumulative basis. The aggregate Class A
Stated Amounts of all Class A Certificates is $50,000,000.
"Class Percentage" means, with respect to each Holder, the percentage
equivalent (carried out to twelve decimal places) of a fraction, the
numerator of which is the Stated Amount of such Holder's Certificates of a
particular class and the denominator of which is the sum of the Stated
Amounts of all of the Certificates of such Class.
"Closing Date" means June 27, 1997.
"Collected Funds" as of any Business Day shall mean all available
funds on deposit in the Master Collection Account (other than funds that
are required to be returned to Related Persons or their designees) not
previously allocated to another Transaction Account.
"Collections" means all funds that are received by Seller, Transferor,
Servicer or Trustee from or on behalf of any Obligor in payment of any
amounts owed in respect of any Purchased Asset, or otherwise applied to
repay or discharge any Purchased Asset, or otherwise constituting proceeds
of Purchased Assets.
"Corporate Trust Office" means the principal office of Trustee in
Minneapolis, Minnesota at which at any particular time its corporate trust
business shall be principally administered.
"Credit and Collections Policy" means Seller's Statement of Policy and
Procedures and Underwriting Guidelines as attached as Exhibit G to the
---------
Pooling Agreement, as such Exhibit may be amended from time to time with
the written approval of the Required Persons.
"CSFB" means Credit Suisse First Boston Mortgage Capital, LLC, a
Delaware limited liability company, and its permitted successors and
assigns.
"Current Carrying Costs" means, on any Business Day during any
Distribution Period, and with respect to each Class of Certificates, the
sum of (i) the amount of accrued and unpaid interest on the Certificates
through such Business Day, (ii) the amount of additional interest that will
be accrued and unpaid on the Certificates through the last day of such
Distribution Period at the interest rates applicable to the Invested Amount
as of such Business Day, (iii) the Servicing Fee payable to the Servicer,
and (iv) the amount of the Trustee Fee that will be payable on the next
Distribution Date.
"Cut-Off Date" means the last day of any Calculation Period.
"Delinquency Test" means Delinquent Receivables owned by the Trust
account for less than five percent (5%) of the total Receivables held in
the Trust.
"Delinquent Receivable" means any Receivable
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<PAGE>
(i) payment for which is more than 59 days overdue (exclusive of
any grace periods and applying any payments made by or on behalf of an
Obligor to the most recent payments due),
(ii) for which the Seller or Servicer determines in good faith
that the Obligor will not continue remitting payments, or
(iii) that is otherwise in material default.
"Disposition" is defined in Section 9.3 of the Pooling Agreement.
"Distribution Date" means the twentieth (20th) day of each calendar
month (or, if not a Business day, the next Business Day).
"Distribution Period" means the period from and including one
Distribution Date, to, but not including, the next Distribution Date,
commencing with the Closing Date.
"Dollars" means dollars in lawful money of the United States of
America.
"Domestic Person" means any Person that has a place of business
located in the United States of America or Puerto Rico or otherwise is
subject to the jurisdiction of one or more civil courts of the United
States of America (other than solely by reason of contractual submission to
such jurisdiction).
"Early Amortization Calculation Date" means the day before an Early
Amortization Period begins.
"Early Amortization Event" mean, any event identified as an Early
Amortization Event in Section 9.1 of the Pooling Agreement.
"Early Amortization Period" means the period beginning on the date (if
any) specified in Section 9.2 of the Pooling Agreement and ending on the
day on which the Invested Amount has been reduced to zero.
"Eligible ABL Receivable" means any receivable arising under an
Obligor Loan Agreement which at the time of determination:
(a) satisfies the General Eligible Receivable Test;
(b) the Related Security for which is a first priority perfected
security interest and fully secures the Receivable;
(c) that satisfies all applicable requirements of the Credit and
Collections Policy;
(d) the original principal balance of which does not exceed 500% of
underwritten cash flow; and
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(e) for which all Related Security Documents have been delivered to
the Trustee or its agent endorsed to the Trustee or in blank.
"Eligible Deposit Account" means (a) a segregated trust account
maintained at a bank with a long-term senior unsecured debt rating of at
least "A" or its equivalent from any Rating Agency or (b) a deposit account
maintained with a bank that has an unsecured long-term senior unsecured
debt rating of at least "A" or its equivalent, or a short-term rating of at
least "A-1" or its equivalent, from any Rating Agency.
"Eligible Investments" means any of the following (other than any such
investments issued by the Seller or any Affiliate thereof):
(a) negotiable instruments or securities represented by instruments in
registered or book-entry form which evidence:
(i) obligations which have the benefit of the full faith and
credit of the United States of America, including depository
receipts issued by a bank as custodian with respect to any
such instrument or security held by the custodian for the
benefit of the holder of such depository receipt,
(ii) demand deposits or time deposits in, or bankers' acceptances
issued by, any depositary institution or trust company
incorporated under the laws of the United States of America or
any state thereof and subject to supervision and examination
by Federal or state banking or depositary institution
authorities, provided that at the time of such investment or
contractual commitment to investment therein, the certificates
of deposit or short-term deposits, if any, or long-term
unsecured debt obligations (other than any such obligation
whose rating is based on collateral or on the credit of a
Person other than such institution or trust company), of such
depositary institution or trust company are rated A-1+, or its
equivalent, by any Rating Agency and, in the case of the
certificates of deposit or short-term deposits, or are rated
AAA by Rating Agency, in the case of long-term unsecured debt
obligations.
(iii) certificates of deposit which, at the time of such investment
or contractual commitment to invest therein, are rated A-1+,
or its equivalent, by any Rating Agency.
(iv) freely redeemable shares in open-end money market mutual funds
(including such mutual funds that are offered by the Person
who is acting as the Trustee or by any agent of such Person)
which (1) maintain a constant net-asset value, (2) at the time
of such investment have been rated not less than "AAAm", or
its equivalent, by any Rating Agency, (3) have offering
materials
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which explicitly state that such fund will not invest in
derivative instruments or enter into derivative contracts and
(4) invest solely in obligations, deposits, bankers'
acceptances, certificates of deposit, repurchase agreements
and commercial paper of the types described in clauses (a)(i)
--------------
through (a)(iii) above and (b) through (e) below, without
--------
regard to the limitation set forth in such clauses as to the
maturity of such obligations, deposits, bankers' acceptances,
certificates of deposit, repurchase agreements or commercial
paper;
(b) demand deposits in the name of Trustee in any depositary
institution or trust company referred to in clause (a)(ii) above;
--------------
(c) commercial paper (having original or remaining maturities of no
more than 270 days) which, at the time of Trustee's investment or
contractual commitment to invest therein, is rated A-1+, or its equivalent,
by any Rating Agency;
(d) Eurodollar time deposits that are obligations of institutions
whose time deposits are rated AAA, or its equivalent, by any Rating Agency;
(e) repurchase agreements involving any Eligible Investment described
in any of clauses (a)(i), (a)(iii) or (d) above, so long as the other party
to such repurchase agreement is rated AAA, or its equivalent, by any Rating
Agency; and
(f) the following:
(i) negotiable instruments or securities represented by
instruments in registered or book-entry form which evidence:
(1) demand deposits or time deposits in, or bankers'
acceptances issued by, and depositary institution or
trust company incorporated under the laws of the United
States of America or any state thereof and subject to
supervision and examination by Federal or state banking
or depositary institution authorities, provided that at
the time of the Trustee's investment or contractual
commitment to invest therein, the certificates or deposit
or short-term deposits, if any (other than any such
obligation whose rating is based on collateral or on the
credit of a Person other than such institution or trust
company), of such depositary institution or trust company
are rated A-1, or its equivalent, by any Rating Agency,
in the case of certificates of deposit or short-term
deposits, or are rated A, or its equivalent, by any
Rating Agency, in the case of long-term unsecured debt
obligations.
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(2) certificates of deposit which, at the time of the
Trustee's investment or commitment to invest therein, are
rated A-1, or its equivalent, by any Rating Agency, or
(3) freely redeemable shares in open-end money market mutual
funds (including such mutual funds that are offered by the
Person who is acting as the Trustee or by any agent of
such Person) which (A) maintain a constant net-asset
value, (B) at the time of such investment have been rated
not less than "Am", or its equivalent, by any Rating
Agency, (C) have offering materials which explicitly state
that such fund will not invest in derivative instruments
or enter into derivative contracts and (D) invest solely
in obligations, deposits, bankers' acceptances,
certificates of deposit, repurchase agreements and
commercial paper of the types described in this clause
(f), without regard to the limitation set forth in such
clauses as to the maturity of such obligations, deposits,
bankers' acceptances, certificates of deposit, repurchase
agreements or commercial paper;
(ii) demand deposits in the name of the Trustee in any depositary
institution or trust company referred to in clause (f)(i)(1)
----------------
above; and
(iii) commercial paper (having original or remaining maturities of
no more than 270 days) which, at the time of Trustee's
investment or contractual commitment to invest therein, is
rated A-1, or its equivalent, by any Rating Agency;
provided that (x) funds on deposit in the Overcollateralization
Account may not be invested in any Eligible Investment described in
clauses (f)(i) through (f)(iii) above, (y) each investment described
-------------------------------
in clauses (f)(i) through (f)(iii) above must have a maturity of 30 or
-------------------------------
fewer days after the time of the investment therein by the Trustee,
and (z) the aggregate amount invested in all investments which are
described in any of clauses (f)(i) through (f)(iii) above at any time
-------------------------------
may not exceed 20% of the total funds on deposit in all Transaction
Accounts at such time;
provided, that any such Eligible Investment specified in clauses (a)
through (f) shall (x) have a predetermined fixed dollar amount of principal
due at maturity that cannot vary or change; (y) if such Eligible Investment
is rated by any Rating Agency, not have an "r" highlighter or its
equivalent affixed to such rating; and (z) if the interest rate on such
Eligible Investment is not fixed, such interest rate shall be tied to a
single interest rate index plus a single fixed spread, if any, and shall
move proportionately with such index.
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<PAGE>
"Eligible Obligor" means at any time, an Obligor that meets the Credit
and Collections Policy requirements and that also satisfies the following
criteria (unless such Obligor is expressly approved as an Eligible Obligor
by the Required Persons);
(a) it is not (except as otherwise specified for any Series in the
related Supplement) a Governmental Authority; and
(b) it is not a direct or indirect Subsidiary or an Affiliate of
Seller or any other entity with respect to which Seller or any of its
Subsidiaries or Affiliates own, directly or indirectly, more than 10% of
the entity's equity interest.
"Eligible Receivable" means any Eligible STL Receivable, Eligible SDWW
Receivable or Eligible ABL Receivable.
"Eligible SDWW Receivable" means any receivable arising under an
Obligor Loan Agreement which at the time of determination:
(a) satisfies the General Eligible Receivable Test;
(b) the Related Security for which is comprised of first or second
priority security interests in receivables or, if approved by Required
Person, which approval shall not be unreasonably withheld, a security
interest of lesser priority, plus warrants as to the ownership interests in
the applicable Obligor which secure the Receivables;
(c) that satisfies in all material respects all applicable
requirements of the Credit and Collections Policy;
(d) the original principal which (collectively with any other
Indebtedness prior to or pari passu with such Receivables) does not exceed
500% of the underwritten cash flow; and
(e) for which all Related Security Documents have been delivered to
the Trustee or its agent endorsed to the Trustee or in blank.
"Eligible STL Receivable" means any receivable arising under an
Obligor Loan Agreement which at the time of determination:
(a) satisfies the General Eligible Receivable Test;
(b) the Related Security for which is a first priority perfected
security interest and fully secures the Receivable;
(c) for which all Related Security Documents have been delivered to
the Trustee or its agent in recordable form endorsed to the Trustee or in
blank;
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(d) the principal balance of which does not exceed 95% of the
appraised value of such real estate at the time of determination and, when
added to all other Eligible STL Receivables, does not cause the weighted
maximum weighted loan to value ratio of all such Eligible STL Receivables
to exceed 85%; and
(e) the representations and warranties contained in Exhibit A to the
Purchase and Sale Agreement are true and correct with respect to each such
Receivable.
"ERISA" means the Employee Retirement Income Security Act of 1974.
"Exchange Act" means the Securities Exchange Act of 1934.
"Federal Funds Rate" means (a) the weighted average of the rates on
overnight Federal funds transactions with members of the Federal Reserve
System arranged by Federal funds brokers, as published for the day (or, if
the day is not a Business Day, the immediately preceding Business Day) by
the Federal Reserve Bank of New York; provided that if the rate is not so
published for any Business Day, the rate for purposes of this clause will
be the average of the quotations for the day on such transactions received
by the Agent from three Federal funds brokers of recognized standing
selected by it, plus (b) 100 basis points.
"Federal Reserve Board" means the Board of Governors of the Federal
Reserve System, or any successor thereto or to the functions thereof.
"Final Distribution Date" is defined in Section 12.2 of the Pooling
Agreement.
"Final Scheduled Payment Date" means the Distribution Date occurring
in June, 2000.
"Fully Funded Date" means the first date falling in the Amortization
Period or an Early Amortization Period on which there are funds on deposit
in the Carrying Cost Account and the Principal Funding Account that, in the
aggregate, equal or exceed the sum of (i) any Servicing Fee payable to
anyone other than a Related Person on the first Distribution Date falling
after that date, and (ii) the Investor Repayment Amount.
"GAAP" means United States of America generally accepted accounting
principles, consistently applied.
"General Eligible Receivable Test" shall mean, with respect to any
Receivable, that such Receivable satisfies each of the following at the
time of determination:
(a) is the obligation of an Eligible Obligor, is fully funded (or will
be fully funded on the same day it is sold to Transferor), is denominated
and payable in U.S. dollars in the United States, and with respect to which
the Unpaid Balance and all other terms reported for such Receivable by
Seller are true and correct;
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<PAGE>
(b) bears interest at a floating rate equal to no less than, through
its remaining term, the sum of the Prime Rate plus 2.00% per annum, which
yield calculation shall include fees payable by the Obligor pursuant to the
related Obligor Loan Agreement;
(c) the related Obligor for which has not been and is not subject to a
Bankruptcy Event;
(d) has a remaining term of no longer than five (5) years;
(e) with respect to which both the representation and warranty of
Transferor in Section 2.4(a)(i) of the Pooling Agreement and the
representations and warranties of Seller in Section 5.1(k) and (u) of the
Purchase Agreement are true and correct in all material respects;
(f) the origination of which (including the sale, if any, by the
originator to Seller, the sale by Seller to Transferor and the transfer by
Transferor to the Trust) does not contravene or conflict with any law, rule
or regulation or any contractual or other restriction, limitation or
encumbrance that applies to (i) Seller, (ii) Transferor, or (iii) the
Trust, and the sale, assignment or transfer of which, and the granting of a
security interest in which, does not require the consent of or permit or
license from, any Person, other than any such consent, permit or license
that has been obtained and continues in full force and effect;
(g) that is not subject to any asserted reduction, cancellation, or
refund or any dispute, offset, counterclaim, lien or defense whatsoever
(including any Permitted Adverse Claim or other potential reduction on
account of any offsetting account payable of Transferor or Seller to the
Obligor or funds of any Obligor held by (x) Transferor or (y) Seller);
(h) that was created in accordance with, and conforms in all material
respects with, all applicable laws, rules, regulations, orders, judgments,
decrees and determinations of all courts and other Governmental Authorities
(whether Federal, state, local or foreign) and including usury laws;
(i) for which the related Obligor Loan Agreement and all other
documents and instruments evidencing, guaranteeing, insuring or otherwise
securing such Receivable have been duly and properly executed by the
parties thereto, and each is the legal, valid and binding obligation of the
maker thereof (subject to any non-recourse provisions contained in any of
the foregoing agreements and any applicable state anti-deficiency
legislation), enforceable in accordance with its terms, except as such
enforcement may be limited by bankruptcy, insolvency, reorganization,
receivership, moratorium or other laws relating to or affecting the rights
of creditors generally and by general principles of equity regardless of
whether such enforcement is considered in a proceeding in equity or at law;
(j) that has not been compromised, adjusted, satisfied, subordinated,
rescinded or modified (including by extension of time or payment or the
granting of any discounts, allowances or credits), by Seller, any Affiliate
thereof or any predecessor in interest with
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respect to such Receivable except to the extent disclosed and such
Receivable, as so modified, would otherwise constitute an Eligible
Receivable;
(k) no payment for which is more than 59 days overdue (exclusive of
any grace periods and applying any payments made by or on behalf of an
Obligor to the most recent payments due) and that is otherwise not in
material default; and
(l) when added to all other Eligible Receivables in the Trust, does
not cause the weighted average yield on Eligible Receivables to be less
than a per annum rate of the Prime Rate plus 3.00%, which yield calculation
shall include fees payable by the Obligor pursuant to the Related Obligor
Loan Agreement.
(m) if the applicable Receivable is not a real estate loan such
Receivable, if transferred to the Trust would not result in the percentage
of the aggregate of all Receivables transferred to the Trust from and after
the Closing Date that were not real estate loans (whether or not
outstanding as of the applicable date of determination) to be greater than
fifty percent (50%).
"Governmental Authority" means the United States of America, any state
or other political subdivision thereof and any entity in the United States
of America or any applicable foreign jurisdiction that exercises executive,
legislative, regulatory or administrative functions of or pertaining to
government.
"Guarantor" means Healthcare Financial Partners, Inc., a Delaware
corporation, and its successors and assigns.
"Guaranty" means any agreement or arrangement by which any Person
directly or indirectly guarantees, endorses, agrees to purchase or
otherwise becomes contingently liable upon any liability of any other
Person (other than by endorsements of instruments in the course of
collection) or guarantees the payment of distributions upon the shares of
any other Person.
"HCFP Indemnified Losses" is defined in Section 9.1 of the Purchase
Agreement.
"HCFP Indemnified Party" is defined in Section 9.1 of the Purchase
Agreement.
"Highest Bid" means the highest cash purchase offer for a Series
received by Servicer pursuant to Section 12.1 of the Pooling Agreement.
"Holder" means the Person in whose name a Certificate is registered in
the Certificate Register at the time of determination.
"Impermissible Qualification" means, relative to the opinion or
certification of any independent certified public accountant as to any
financial statement of Seller, any qualification or exception to such
opinion or certification that is of a "going concern" or similar nature.
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"Indebtedness" of any Person means all of that Person's obligations
for borrowed money, obligations evidenced by bonds, debentures, notes or
other similar instruments, obligations as lessee under leases that are
required by GAAP to be recorded as capitalized leases and obligations to
pay the deferred purchase price of property services.
"Indemnified Losses" is defined in Section 7.3 of the Pooling
Agreement.
"Indemnified Party" is defined in Section 7.3 of the Pooling
Agreement.
"Initial Cut-Off Date" means the Business Day immediately preceding
the Initial Purchase Date.
"Initial Purchase Date" means the date on which the initial Purchase
shall be made which shall be a Subsequent Closing Date.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended.
"Invested Amount" means, at any time, the sum of the Class A Invested
Amount.
"Investor Certificateholder" means the Person in whose name an
Investor Certificate is registered in the Certificate Register at the time
of determination.
"Investor Certificates" means the Class A Certificates.
"Investor Repayment Amount" means, on any Business Day falling in the
Amortization Period or an Early Amortization Period, the sum of (a) the
outstanding principal amount of the Series 1997-1 Certificates, plus (b)
all accrued and unpaid interest and any Additional Amounts known to be
payable on the Series 1997-1 Certificates on the first Distribution Date
falling after that date, plus (c) an amount determined by Trustee as
reasonably expected to constitute Additional Amounts but are not known to
be payable on the Series 1997-1 Certificates on the first Distribution Date
falling after that date.
"Issuance" is defined in Section 6.10(b) of the Pooling Agreement.
"Issuance Date" is defined in Section 6.10(b) of the Pooling
Agreement.
"Issuance Exchange" is defined in Section 6.10(a) of the Pooling
Agreement.
"Issuance Notice" is defined in Section 6.10(b) of the Pooling
Agreement.
"LIBOR" means the per annum interest rate determined by the Required
Person equal to the rate offered for one month deposits in US dollars in
the London interbank maker which appears on Telerate Page 3750 or such
other page as may replace Page 3750 on that service or such other service
or services as may be nominated by the British Bankers Association for the
purposes of displaying such rate (collectively, "Telerate page 3750") as of
9:00 A.M. New York City time on the day which is two Business Days prior to
the Closing Date and each
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<PAGE>
Subsequent Closing Date; provided, that in the event that more than one
--------
such rate is provided, the arithmetic mean of such rates shall apply, and
in the event that no such rate is published, then LIBOR shall be determined
from such comparable financial reporting company as the Required Person in
its discretion shall determine.
"Master Collection Account" is defined in Section 4.2 of the Pooling
Agreement.
"Material Adverse Effect" means, (a) with respect to any Person, as
specified in the applicable Transactional Document, and any event or
circumstance at any time, a material adverse effect on the ability of that
Person to perform its obligations under the relevant Transaction Document
or (b) with respect to any Person, event or circumstance, at any time, a
material adverse effect on the validity, enforceability or collectibility
of any Receivables, Related Assets, or amounts due Seller, Transferor or
the Trust under any Obligor Loan Agreements; provided, that for the purpose
of determining whether any Adverse Claim or other event or circumstance
results (or has a likelihood of resulting) in a Material Adverse Effect,
the effect of such event or circumstance shall be considered in the
aggregate with the effect of all other Adverse Claims (including Permitted
Adverse Claims) or other events and circumstances occurring or existing at
the time of such determination.
"Monthly Report" is defined in Section 3.5(d) of the Pooling
Agreement.
"Net Invested Amount" means, on any Business Day, the Invested Amount,
reduced by the aggregate balance on deposit in the Purchase Account and the
Principal Funding Account.
"New Issuance" is defined in Section 6.10(a) of the Pooling Agreement.
"Non-Recourse Claim" is defined in Section 11.3 of the Pooling
Agreement.
"Obligations" means (a) all obligations of Seller, Transferor and the
Servicer to Trustee, the Trust, any other Indemnified Party, the Investor
Certificateholders and their respective successors, permitted transferees
and assigns, arising under or in connection with the Transaction Documents,
and (b) all obligations of Seller to Buyer, any other HCFP Indemnified
Party and their respective successors, transferees and assigns, arising
under or in connection with the Transaction Documents, in each case
howsoever created, arising or evidenced, whether direct or indirect,
absolute or contingent, now or hereafter existing, or due or to become due.
"Obligor" means a Person obligated to make payments on a Receivable.
"Obligor Loan Agreement" an agreement between Seller and an Eligible
Obligor substantially in the form attached hereto as Exhibit 1, with such
changes thereto as may be (i) satisfactory to the Required Persons, as
approved by them in writing or (ii) deemed immaterial by the Required
Persons in their reasonable discretion after prior notice of such change
has been provided at least 14 days prior to execution of such change. The
change will
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<PAGE>
be deemed immaterial if the Required Persons do not object in writing
within ten days of receipt of such notice.
"Officer's Certificate" means, unless otherwise specified in the
Pooling Agreement, a certificate signed by an Authorized Officer of
Transferor, Servicer, or Seller, as the case may be, or, in the case of a
Successor Servicer, a certificate signed by the President, and Vice
President, Assistant Treasurer or the financial controller (or an officer
holding an office with equivalent or more senior responsibilities) of such
Successor Servicer, that, in the case of any of the foregoing, is delivered
to Trustee.
"Opinion of Counsel" means a written opinion of counsel, who shall be
reasonably acceptable to Trustee and the Required Persons.
"Origination and Servicing Party" means any of Seller, Servicer, each
Sub-Servicer and Transferor.
"Overcollateralization Account" is defined in Section 4.2 of the
Pooling Agreement.
"Parent Guarantee" means the Guarantee dated as of June 27, 1997 from
the Guarantor in favor of the Trustee.
"Paying Agent" means any paying agent appointed pursuant to Section
6.6 of the Pooling Agreement and shall initially be Trustee.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permitted Adverse Claims" means (a) ownership or security interests
arising under the Transaction Documents, and (b) liens of taxes,
assessments or charges of any Governmental Authority (other than Tax or
ERISA Liens) and liens of landlords, carriers, warehousemen, mechanics and
materialmen imposed by law in the ordinary course of business, in each case
(i) for amounts not yet due or (ii) which are being contested in good faith
by appropriate proceedings and with respect to which adequate reserves or
other appropriate provisions are being maintained in accordance with GAAP,
provided that the aggregate amount secured by all liens referred to in this
clause (ii) does not exceed $50,000.
"Permitted Sale" is defined in Section 10.16 of the Purchase
Agreement.
"Person" means an individual, partnership, limited liability company,
corporation (including a business trust), joint stock company, trust,
unincorporated association, joint venture, government or any agency or
political subdivision thereof or any other entity.
"Pooling Agreement" means the Pooling and Servicing Agreement, dated
as of the Closing Date, among Transferor, as transferor, the initial
Servicer, as Servicer, and Trustee, as it may be amended, supplemented or
otherwise modified from time to time.
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<PAGE>
"Prime Rate" means, on any day, a fluctuating rate of interest per
annum equal to the highest of:
(i) the rate of interest announced, from time to time, by Trustee
as its prime commercial rate for United States dollar loans made in the
United States for any day, or, if Trustee shall cease to announce such
rate, the rate of interest announced, from time to time, by the commercial
bank then having the largest capital and surplus of any such commercial
bank in New York, New York as its prime commercial rate for United States
dollar loans made in the United States for any day, and
(ii) the Federal Funds Rate.
Any change in the interest rate resulting from a change in the prime
commercial rate announced by Trustee or other bank as provided above shall
become effective without prior notice to Transferor or Servicer as of 12:01
a.m., New York City time, on the Business Day on which each change in the
prime commercial rate is announced by Trustee or other bank as provided
above. The prime commercial rate is a reference rate and does not
necessarily represent the lowest or best rate actually charged by Trustee
or other bank as provided above to any customer. Trustee or other bank as
provided above may make commercial loans or other loans at rates of
interest at, above or below the prime commercial rate.
"Principal Funding Account" is defined in Section 4.2 of the Pooling
Agreement.
"Principal Payment Date" means (i) with respect to any Series 1997-1
Certificate during the Revolving Period, any date on which the Invested
Amount is to be reduced pursuant to Section 3.1 of the Certificate Purchase
Agreements, (ii) with respect to any Series 1997-1 Certificate during an
Amortization Period or Early Amortization Period, each Distribution Date
falling in such Amortization Period or Early Amortization Period.
"Private Holder" shall mean each holder of a right to receive interest
or principal with respect to a Certificate, other than Certificates with
respect to which an Opinion of Counsel is rendered that such Certificates
will be treated as debt for Federal income tax purposes, and any holder of
a right to receive any amount in respect to the Transferor Certificate. A
Person holding more than one interest in the Trust each of which separately
would cause such Person to be a Private Holder shall be treated as a single
Private Holder; a Private Holder that would be a partnership, an S
corporation or a grantor trust under the Internal Revenue Code shall be
treated as one or more Private Holders in accordance with the provisions of
Treasury Regulation Section 1.7704-1 or any successor provision of law.
"Program" means the transactions contemplated in the Transaction
Documents.
"Publication Date" is defined in Section 9.3(a) of the Pooling
Agreement.
"Public Notice" means all assignments, financing statements (and
continuation statements or financing change statements with respect to such
financing statements where applicable), recordings, filings, notices and
registrations and any other instrument similar in
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effect, and all amendments or assignments of any of the foregoing, relating
to assignment or perfection of a security interest or lien meeting the
requirements of applicable state, provincial, territorial or other local
law.
"Purchase" means each purchase of Receivables and Related Assets by
Transferor from Seller under the Purchase Agreement.
"Purchase Account" is defined in Section 4.2 of the Pooling Agreement.
"Purchase Agreement" means the Purchase and Sale Agreement, dated as
of the Closing Date, between Seller and Transferor.
"Purchase Price" is defined in Section 2.2 of the Purchase Agreement.
"Purchase Report" is defined in Section 2.1 of the Purchase Agreement.
"Purchase Termination Date" is defined in Section 1.1 of the Purchase
Agreement.
"Purchased Assets" is defined in Section 1.1 of the Purchase
Agreement.
"Purchased Receivables" is defined in Section 1.1 of the Purchase
Agreement.
"Rating Agency" means either of Standard & Poor's Ratings Services,
Moody's Investor Services, Inc., Duff & Phelps Credit Rating Company, or
Fitch Investors Service, Inc.
"Receivable" means any claim for the repayment of funds advanced to an
Obligor, fees and interest earned thereon and other amounts payable with
respect thereto, pursuant to an Obligor Loan Agreement.
"Receivables Pool" means at any time all Receivables then held by the
Trust.
"Record Date" means the fifteenth (15th) day of each month (or, if not
a Business Day, the next Business Day).
"Records" means all purchase orders, invoices and other agreements,
documents, books, records and other media for the storage of information
(including tapes, disks, punch cards, computer programs and databases and
related property) maintained by Transferor, Seller or Servicer with respect
to the Transferred Assets and/or the related Obligors. Seller shall be
permitted to retain sufficient copies of the Records to monitor its
obligations under the Purchase Agreement.
"Related Assets" is defined in Section 1.1 of the Purchase Agreement.
"Related Person" means the Seller and each of its Affiliates (other
than Transferor).
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<PAGE>
"Related Purchased Assets" is defined in Section 1.1 of the Purchase
Agreement.
"Related Security" means, with respect to any Receivable, (a) all of
the applicable liens, security interests and possessory interests from time
to time purporting to secure payment of such Receivable, whether pursuant
to the Obligor Loan Agreement related to the Receivable or otherwise, (b)
all property of any kind acquired through the enforcement of such liens,
security interests or possessory rights, or in lien thereof, and (c) all
letters of credit, guarantees, insurance policies and other agreements or
arrangements of whatever character from time to time supporting or securing
payment of such Receivable, whether pursuant to the contract with the
Obligor related to the Receivable or otherwise.
"Related Security Documents" means all such assignments, mortgages,
financing statements and other documentation required or appropriate to
convey to the Trustee the Related Security.
"Related Transferred Assets" is defined in Section 2.1(a) of the
Pooling Agreement.
"Report Date" means the Business Day that is three Business Days prior
to a Distribution Date.
"Repurchase Amount" is defined in Section 12.4 of the Pooling
Agreement.
"Repurchase Distribution Date" is defined in Section 12.4 of the
Pooling Agreement.
"Repurchase Price" means the purported Unpaid Balance of a Receivable
at such time as it was sold to Buyer under the Purchase Agreement, plus all
interest accrued on such Unpaid Balance (paid and unpaid) from the time the
Receivable was conveyed to the Trust, plus all Servicing Fees and other
expenses incurred by the Trust in owning and enforcing such Receivable,
less all payments actually received by the Trust with respect to such
Receivable.
"Required Person" means the Holder of Class A Certificates having the
largest Class Percentage.
"Required Series Holders" means with respect to any action to be taken
by Investor Certificateholders, Investor Certificateholders that evidence
at least 66-2/3% of the principal amount of those Certificates.
"Reserve Account" is defined in Section 4.2 of the Pooling Agreement.
"Responsible Officer" means, when used with respect to Trustee, (a)
any officer within the Corporate Trust Office (or any successor group of
Trustee), including any vice president, assistant vice president or any
officer or assistant trust officer of Trustee customarily performing
functions similar to those performed by the persons who hold the office of
vice president, assistant vice president, or assistant secretary and (b)
any other officer within the Corporate Trust Office with direct
responsibility for the administration of the
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<PAGE>
Pooling Agreement or to whom any corporate trust matter is referred at
Trustee's Corporate Trust Office because of such officer's knowledge of and
familiarity with the particular subject.
"Revolving Period" means the period beginning on the Closing Date and
ending on the day before the first day of the Amortization Period or an
Early Amortization Period.
"Securities Act" means the Securities Act of 1933, as amended.
"Seller" means HCFP Funding II, Inc., a Delaware corporation and any
successor permitted thereto under the Purchase Agreement or any entity that
acquires its rights and obligations under the Transaction Documents.
"Seller Account" is defined in Section 3.1(b) of the Purchase
Agreement.
"Seller Assignment Certificate" means an assignment by a Seller,
substantially in the form of Exhibit A to the Purchase Agreement,
evidencing Transferor's acquisition of the Purchased Assets generated by
the Seller, as it may be amended, supplemented or otherwise modified from
time to time.
"Seller Change Event" is defined in Section 3.5(e) of the Pooling
Agreement.
"Seller Receivables Review" is defined in Section 6.1(c) of the
Purchase Agreement.
"Seller Transaction Documents" means the Purchase Agreement and the
Seller Assignment Certificates.
"Series" means any series of Investor Certificates issued pursuant to
Section 6.10 of the Pooling Agreement.
"Series Interest" is defined in Section 4.1 of the Pooling Agreement.
"Series 1997-1 Certificates" means any of the Class A Certificates.
"Series Percentage" means, with respect to each Purchaser, the
percentage equivalent (carried out to twelve decimal places) of a fraction,
the numerator of which is the Stated Amount of such Purchaser's Certificate
and the denominator of which is the sum of the Stated Amounts for all of
the Series 1997-1 Certificates.
"Service Transfer" is defined in Section 10.2(b) of the Pooling
Agreement.
"Servicer" means at any time the Person then authorized pursuant to
Article III of the Pooling Agreement to service, administer and collect
Receivables and Related Transferred Assets.
"Servicer Default" is defined in Section 10.1 of the Pooling
Agreement.
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<PAGE>
"Servicer Report" is defined in Section 4.8 of the Pooling Agreement.
"Servicing Advances" means out-of-pocket expenses paid by Servicer in
the course of executing its duties under the Pooling Agreement.
"Servicing Fee" is defined in Section 3.4(a) of the Pooling Agreement.
"Solvent" shall mean, as to any Person as of the applicable date of
determination, that such Person has capital sufficient to carry on its
business and transactions and all business and transactions to which it is
about to engage, is able to pay its debts as they mature, and owns property
having a value, both at fair valuation and at the then fair saleable value,
greater than the amount required to pay its then existing debt (including
contingencies).
"S&P" means Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc.
"Stated Amount" means as to any Certificate, the initial maximum
principal amount that may be required to be funded by the Holder of such
Certificate.
"Subject Instruments" means any Certificates with respect to which the
Transferor shall not have received an Opinion of Counsel to the effect that
such Certificates will be treated as debt for Federal income tax purposes.
"Subordination Test" means that both (i) the Invested Amount is no
more than 88% of the Unpaid Balance of the Receivables, and (ii) the Unpaid
Balance of the Receivables exceeds the Invested Amount by at least
$3,000,000.
"Sub-Servicer" is defined in Section 3.1 of the Pooling Agreement.
"Subsequent Closing Date" shall mean the second and fourth Wednesday
of each month, or if such day is not a Business Day, the next succeeding
Business Day.
"Subsidiary" means, with respect to any Person, any corporation of
which more than 50% of the outstanding capital stock having ordinary voting
power to elect a majority of the board of directors of such corporation
(irrespective of whether at the time capital stock of any other class or
classes of such corporation shall or might have voting power upon the
occurrence of any contingency) is at the time directly or indirectly owned
by such Person.
"Successor Servicer" is defined in Section 10.2(a) of the Pooling
Agreement.
"Supplement" means each supplement to the Pooling Agreement executed
by Transferor, Servicer and Trustee to specify the terms of a Series of
Certificates, as the same may be amended, supplemented or otherwise
modified from time to time.
"Tax or ERISA Lien" means a lien arising under Section 6321 of the
Internal Revenue Code or Section 302(f) or 4068 of ERISA.
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<PAGE>
"Tax Opinion" means, with respect to any action, an Opinion of Counsel
to the effect that, for Federal and state income and franchise tax
purposes, (a) such action will not adversely affect the existing
characterization of the Investor Certificates of any outstanding Series or
class as debt or (if applicable) as interests in a partnership (that is not
a publicly traded partnership), (b) following such action the Trust will
not be treated as an association (or publicly traded partnership) taxable
as a corporation, (c) such action will not be treated as a taxable event to
any Investor Certificateholder or Certificate Owner and (d) in the case of
the original issuance of any Series or class of Investor Certificates, the
Investor Certificates of the new Series or class will properly be
characterized as debt.
"Termination Notice" is defined in Section 10.1 of the Pooling
Agreement.
"Transaction Accounts" is defined in Section 4.2 of the Pooling
Agreement.
"Transaction Documents" means each Seller Transaction Document, the
Pooling Agreement, the Certificate Purchase Agreements, the Guarantee and
the related Certificates as any of the same from time to time may be
amended, supplemented, amended and restated or otherwise modified in
accordance with the terms thereof.
"Transfer Agent and Registrar" means any transfer agent and registrar
appointed pursuant to Section 6.3 of the Pooling Agreement and shall
initially be Trustee.
"Transferor" means Wisconsin Circle II Funding Corporation, a Delaware
corporation.
"Transferor Certificate" means a certificate substantially in the form
of Exhibit E to the Pooling Agreement, as described in Section 4.1 of the
Pooling Agreement.
"Transferor Indemnified Losses" has the meaning provided in Section
7.3 of the Pooling Agreement for "Indemnified Losses."
"Transferor Indemnified Party" has the meaning provided in Section 7.3
of the Pooling Agreement for "Indemnified Party."
"Transferor Interest" is defined in Section 4.1 of the Pooling
Agreement.
"Transferred Assets" is defined in Section 2.1 of the Pooling
Agreement.
"Trigger Event" is defined in Section 9.3(a) of the Pooling Agreement.
"Trust" means the trust created by the Pooling Agreement, which shall
be known as the STL 1997-1 Trust.
"Trustee" means First Bank National Association, a national bank in
its capacity as agent for the Certificateholders, or its successor-in-
interest, or any successor trustee appointed as provided in the Pooling
Agreement.
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"Trust Interests" means the fractional undivided beneficial interests
in the assets of the Trust.
"UCC" means the Uniform Commercial Code as from time to time in effect
in the applicable jurisdiction or jurisdictions.
"Underwriting Guidelines" means the Underwriting Guidelines contained
in the Credit and Collections Policy and attached as part of Exhibit E to
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the Purchase Agreement, as the same may be amended from time to time with
the written approval of the Required Persons.
"Unmatured Early Amortization Event" means any event or condition
that, with the giving of notice or lapse of time, or both, would become an
Early Amortization Event.
"Unpaid Balance" of any Receivable means at any time the unpaid amount
thereof (excluding interest accrued for the period after the due date of
such Receivable, related service charges and other reimbursable amounts) as
shown in the books of Servicer at such time.
"Verification Notice" is defined in Section 3.2 of the Pooling
Agreement.
B. Other Terms. All accounting terms not specifically defined herein
-----------
shall be construed in accordance with GAAP. To the extent that the definitions
of accounting terms in any Transaction Document are inconsistent with the
meanings of such terms under GAAP, the definitions contained in such Transaction
Document shall control.
C. Reference. The words "hereof", "herein" and "hereunder" and words of
---------
similar import when used in any Transaction Document shall refer to such
Transaction Document as a whole and not to any particular provision of such
Transaction Document; and reference to "Section", "subsection", "Schedule" and
------- ---------- --------
"Exhibit" in any Transaction Document are references to Sections, subsections,
- --------
Schedules and Exhibits in or to such Transaction Document unless otherwise
specified in such Transaction Document.
D. Number and Gender. Each defined term used in the Transaction
-----------------
Documents has a comparable meaning when used in its plural or singular form.
Each gender-specific term used in the Transaction Documents has a comparable
meaning whether used in a masculine, feminine or gender-neutral form.
E. Including. Whenever the term "including" (whether or not that term is
---------
followed by the phrase "but not limited to" or "without limitation" or words of
similar effect) is used in the Transaction Documents in connection with a
listing of items within a particular classification, that listing will be
interpreted to be illustrative only and will not be interpreted as a limitation
on, or exclusive listing of, the items within that classification.
F. Reference to Statutes and Regulations. References to a statute shall
-------------------------------------
refer to such statute and any successor statute, and to all regulations
promulgated under or implementing the
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statute or successor, as in effect at the relevant time. References to a
regulation shall refer to such regulation and any successor regulation, as in
effect from time to time.
G. Regulatory Bodies. References to a governmental or quasi-governmental
-----------------
agency, authority or instrumentality shall also refer to a regulatory body that
succeeds to the functions of such agency, authority or instrumentality.
H. Time Periods. In computing periods from a specified date to a later
------------
specified date, when precise times of day are not stated, the words "from" and
"commencing on" (and the like) mean "from and including," and the words "to,"
"until" and "ending on" (and the like) mean "to but excluding."
I. Time of Day. Unless otherwise specified, indications of time of day
-----------
mean New York, New York time.
J. Interpretation of Standards. The parties acknowledge that this
---------------------------
Agreement and the other Transaction Documents contain many determinations,
standards and measurements which must be made or applied by the Transferor and
the Servicer in the process of performing their obligations under this Agreement
and the other Transaction Documents, including the determination of whether
Receivables constitute Eligible Receivables, when or whether dilutions, write-
offs or Early Amortization Events have occurred, and many other matters. The
Transferor and Servicer shall make or apply such determinations, standards and
measurements in good faith and using reasonable judgment, and the Transferor and
Servicer shall bear the burden of proof in any dispute with the Trustee or any
Required Persons regarding any such determinations, standards or measurements.
K. "Or". The word "or" is not exclusive. Thus, "A or B" means "A or B
----
or both."
L. Agreements. References to any agreement, arrangement or other
----------
document shall refer to such agreement, arrangement or other document as the
same may be amended, supplemented, amended and restated, endorsed or otherwise
modified from time to time, together with any other agreement, arrangement or
other document entered into or executed in substitution therefor or renewal
thereof in accordance with the Transaction Documents.
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EXHIBIT 1
to Definitions
FORM OF OBLIGOR LOAN AGREEMENT
------------------------------
[TO COME FROM S&S]
1-1
<PAGE>
EXHIBIT 10.19
GUARANTEE
---------
1. THE GUARANTEE.
-------------
1.1 GUARANTOR'S AGREEMENT. HEALTHCARE FINANCIAL PARTNERS, INC. a
---------------------
Delaware corporation having an office at 2 Wisconsin Circle, Suite 320, Chevy
Chase, Maryland 20815 (the "GUARANTOR"), hereby unconditionally and irrevocably
guarantees (the "GUARANTEE") to First Bank, National Association, a national
banking association having an office at 100 Wall Street, Suite 1600, New York,
New York 10005 (the "TRUSTEE"), the prompt and complete payment when due of all
"LIABILITIES" (as defined in Section 1.2 below). This Guarantee is absolute,
independent, irrevocable and continuing under all circumstances, subject to the
conditions hereof, and is a guaranty of payment, not of collection.
This Guarantee is executed and delivered by the Guarantor in connection
with that certain Purchase and Sale Agreement dated as of June 25, 1997 (as
amended, restated, supplemented or otherwise modified from time to time, the
"PURCHASE AND SALE AGREEMENT"), between HCFP Funding II, Inc. ("SELLER") and
Wisconsin Circle II Funding Corporation ("BUYER"). Buyer has pledged its rights
under the Purchase and Sale Agreement to the Trustee pursuant to a Pooling and
Servicing Agreement dated as of June 25, 1997 (the "POOLING AGREEMENT") securing
certain certificates issued by the Buyer (the "CERTIFICATES"). Buyer has
engaged the Seller as the initial servicer (the "SERVICER") for the assets
acquired under the Purchase and Sale Agreement pursuant to the Pooling
Agreement. Buyer has required that Guarantor execute and deliver this Guarantee
as a condition precedent to Buyer's acquisition under the Purchase and Sale
Agreement and its issuance of the Certificates. Capitalized terms used in this
Guarantee and not otherwise defined herein shall have the meaning defined in the
Pooling Agreement.
The Guarantor's obligation to pay any Liabilities to the Trustee shall
arise hereunder and be due and payable within three (3) Business Days after
written demand therefor upon the Guarantor by the Trustee or by the Servicer.
Notwithstanding the foregoing, in the event the Guarantor is the Servicer,
demand on the Guarantor shall not be required hereunder. Payment under this
Guarantee shall be made by the Guarantor when due in immediately available funds
directly to the Master Collection Account maintained by the Trustee pursuant to
the Pooling Agreement.
1.2 LIABILITIES. For purposes of this Guarantee, the term "LIABILITIES"
-----------
shall mean for the Collection Period immediately preceding each Payment Date the
sum of all amounts due and owing by the Seller under the Purchase and Sale
Agreement with respect to
<PAGE>
(i) all amounts due in the aggregate for all claims for indemnification of
the Seller under Section 9.1 of the Purchase and Sale Agreement all costs
and losses related to a breach of any representation or warranty by the
Seller or Servicer that a Purchased Receivable is an Eligible Receivable,
and all Indemnified Losses of the Servicer incurred pursuant to Section 8.4
of the Pooling Agreement;
(ii) all reasonable costs and expenses incurred by the Trustee in
endeavoring to enforce the Guarantor's payment of the foregoing clause (i);
and
(iii) interest accruing on the amounts in the foregoing clauses (i) and
(ii) from the date when payment is due under this Guarantee to the date
actually paid at the per annum rate of interest [DEFAULT RATE].
1.3 TERMINATION. This Guarantee shall terminate at such time as
-----------
Seller shall have maintained stockholder's equity calculated in accordance with
GAAP of at least $20,000,000 (on a basis that is not consolidated with
Guarantor) for a twelve month period as evidenced at the end of each of four
consecutive fiscal quarters by Seller's quarterly financial statements and its
audited financial statement for such fiscal year.
2. REPRESENTATIONS AND WARRANTIES OF GUARANTOR. Guarantor represents and
-------------------------------------------
warrants as of the date hereof and as of the Closing Date (except as otherwise
provided) as follows:
2.1 DUE ORGANIZATION AND QUALIFICATION. Guarantor is duly organized
----------------------------------
and is validly existing as a corporation in good standing under the laws of the
State of Delaware, with full corporate power and authority to own its assets and
conduct its business as it is conducted, and is duly qualified as a foreign
corporation in good standing in all jurisdictions in which the ownership or
lease of its property or the conduct of its business requires such qualification
(except where the failure to qualify would not have a materially adverse effect
on the ability of the Guarantor to perform its obligations under this
Guarantee).
2.2 AUTHORIZATION; NONCONTRAVENTION. The execution and delivery by
-------------------------------
Guarantor of this Guarantee and the performance of Guarantor's obligations
hereunder are within the corporate power of Guarantor and have been duly
authorized by Guarantor, and neither the execution and delivery by Guarantor of
this Guarantee nor the compliance by Guarantor with the provisions hereof, will
(i) conflict with or result in a breach of, or constitute a default under, the
charter or by-laws of Guarantor or, after giving effect to the consents or
taking of the actions contemplated by clause (ii) of this paragraph, any of the
provisions of any law, governmental rule, regulation, judgment, decree or order
binding on Guarantor or its properties, or any of the provisions of any material
indenture or mortgage or any other material contract or other instrument to
which Guarantor is a party or by which it is bound or result in the creation or
imposition of any lien, charge or encumbrance upon its properties pursuant to
the terms of any such indenture, mortgage, contract or other instrument, or (ii)
require the consent of or notice to, or any filing with any person, entity or
governmental body, which has not been obtained or made by Guarantor, except
where, in any of the instances contemplated by clause (i) or
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<PAGE>
clause (ii) above, the failure to do so will not have a material adverse effect
on the ability of the Guarantor to perform its obligations under this Guarantee.
2.3 BINDING NATURE. This Guarantee has been duly executed and
--------------
delivered by Guarantor and this Guarantee constitutes a legal, valid and binding
instrument, enforceable against Guarantor in accordance with its terms, subject,
as to the enforcement of remedies, to applicable bankruptcy, reorganization,
insolvency, moratorium and other laws affecting the rights of creditors
generally and to general principles of equity and the discretion of the court
(regardless of whether enforcement of such remedies is considered in a
proceeding in equity or at law) and, as to rights of indemnification hereunder,
subject to limitations of public policy under applicable securities laws.
2.4 NO LITIGATION. There is no litigation, charge, investigation,
-------------
action, suit or proceeding by or before any court, regulatory authority or
governmental agency or body pending or, to the knowledge of Guarantor,
threatened against Guarantor the outcome of which could be reasonably expected
to materially adversely affect the ability of the Guarantor to perform its
obligations under this Guarantee.
2.5 NET WORTH. The aggregate stockholders' equity of the Guarantor
---------
calculated on a consolidated basis in accordance with GAAP is at least equal to
$20,000,000.
3. AGREEMENTS. The Guarantor hereby agrees as follows:
----------
3.1 RESCINDED OR RETURNED PAYMENTS. If at any time any part of any
------------------------------
payment previously applied by the Trustee to any of the Liabilities is required
to be rescinded, set aside, or returned by the Trustee to any Person for any
reason, including payment being deemed fraudulent, preferential or invalid, or
the insolvency, bankruptcy or reorganization of the Guarantor or the Seller,
whether before or after the surrender or cancellation of this Guarantee, such
Liabilities shall be deemed to have continued in existence to the extent that
such payment is rescinded or returned, and this Guarantee shall be reinstated as
to such Liabilities as though such prior application by the Trustee had not been
made; and
3.2 CERTAIN EVENTS NOT AFFECTING OBLIGATIONS OF GUARANTOR. The
-----------------------------------------------------
obligations of the Guarantor hereunder shall not be affected by any of the
following: (i) the release or discharge of the Seller in any creditors',
receivership, bankruptcy, reorganization, insolvency or other proceeding, or by
benefit of a statute of limitations, operation of law or otherwise; (ii) the
impairment or modification of any of the Liabilities, or of any remedy for the
enforcement thereof resulting from any present or future federal or state
bankruptcy law or any other law of any kind; and (iii) any other circumstance
which might otherwise constitute a legal or equitable discharge or defense of a
surety or guarantor.
3.3 NATURE OF GUARANTEE. This Guarantee is a guarantee of payment
-------------------
and not of collection. The Guarantor hereby guarantees that the obligations will
be paid strictly in accordance with the terms hereof, regardless of the value,
genuineness, validity, regularity or enforceability of the Purchase and Sale
Agreement and of any law, regulation or order now or hereafter in effect in any
jurisdiction affecting any of such terms or the rights of the Trustee with
respect thereto. The liability of the Guarantor to the extent herein set forth
shall be absolute
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<PAGE>
and unconditional, not subject to any reduction, limitation, impairment,
termination, defense, offset, counterclaim or recoupment whatsoever (all of
which are hereby expressly waived by the Guarantor) whether by reason of any
claim of any character whatsoever, including, without limitation, any claim of
waiver, release, surrender, alteration or compromise, or by reason of any
liability at any time to the Guarantor or otherwise, whether based upon any
obligations or any other agreement or otherwise, and howsoever arising, whether
out of action or inaction or otherwise and whether resulting from default,
willful misconduct, negligence or otherwise, and without limiting the foregoing
irrespective of (i) any lack of validity or enforceability of the Purchase and
Sale Agreement or of any agreement or instrument relating thereto; (ii) any
change in the time, manner or place of payment of, or in any other term in
respect of, all or any of the Liabilities, or any other amendment or waiver of
or consent to any Liabilities, or any other amendment or waiver or consent to
any departure from any other agreement relating to any of the Liabilities, (iii)
any increase in, addition to, exchange or release of, or nonperfection of any
lien on or security interest in, any collateral, or any release or amendment or
waiver of or consent to any departure from or failure to enforce any other
guarantee, for all or any of the Liabilities; (iv) any other circumstance which
might otherwise constitute a defense available to, or a discharge of, the Seller
in respect of the Liabilities of the Guarantor in respect hereof; (v) the
absence of any action on the part of the Trustee to obtain payment of the
obligations from the Seller; (vi) any insolvency, bankruptcy, reorganization or
dissolution, or any proceeding of the Seller or the Guarantor, including,
without limitation, rejection of the Liabilities in such bankruptcy; or (vii)
the absence of notice of any delay in any action to enforce any obligations or
to exercise any right or remedy against the Guarantor or the Seller whether
hereunder, under any obligations or any agreement or any indulgence, compromise
or extension granted.
3.4 NET WORTH. The Guarantor will maintain aggregate stockholders'
---------
equity calculated on a consolidated basis in accordance with GAAP at all times
in an amount at least equal to $20,000,000.
3.5 EQUITY. Without the consent of the Purchaser, the Guarantor
------
shall not permit the issuance of any additional equity or indebtedness unless
such is subordinated in all respects to payments of this Guarantee, and (i)
purchase by CSFB or its Affiliate.
4. WAIVERS. The Guarantor hereby expressly waives, to the extent
-------
permitted by applicable law:
4.1 NOTICES. Except for any notices specifically required by this
-------
Guarantee, notice of the acceptance by the Trustee of this Guarantee; notice of
the existence or creation of any of the Liabilities, presentment, demand, notice
of dishonor, protest, notice of protest; and all other notices, including
notices that may be required by statute, rule of law or otherwise to preserve
any right of the Trustee against the Guarantor with respect to the delivery,
acceptance, performance, default or enforcement of this Guarantee;
4.2 DISCLOSURES ABOUT THE BUYER OR PURCHASED ASSETS. Any obligation
-----------------------------------------------
the Trustee may have to disclose to the Guarantor any facts the Trustee or the
Servicer now or hereafter may know or have reasonably available to it regarding
the Seller or such person's respective financial condition, whether or not the
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<PAGE>
Trustee or the Servicer has a reasonable opportunity to communicate such facts
or has reason to believe that any such facts are unknown to the Guarantor;
4.3 SERVICING AND DILIGENCE IN COLLECTION. (i) Any defenses to
-------------------------------------
payment under this Guarantee by reason of any acts or omissions of the Servicer
or the Trustee in administering and enforcing the Purchase and Sale Agreement,
(ii) any right to require that any person proceed against or exhaust any
security given to or held by the Seller, the Servicer or the Trustee, or pursue
any other remedy in the power of the Seller, Servicer or Trustee, and (ii) any
requirement that the Trustee protect, secure, perfect or insure any security
interest or lien or any property subject thereto or exhaust any right to take
any action against any person or any collateral (including any rights relating
to marshaling of assets); and
4.4 PERFORMANCE. Any ability to claim a defense to its performance
-----------
under this Guarantee by reason of the actual or alleged performance or non-
performance of a party to any agreement to which the Buyer or the Trustee is a
party.
4.5 SUBROGATION. Guarantor shall have no rights (direct or indirect)
-----------
of subrogation, contribution, reimbursement, indemnification, or other rights of
payment or recovery from any person or entity (including, without limitation,
the Buyer) for any payments made by the Guarantor hereunder, and Guarantor
hereby waives and releases, absolutely and unconditionally, any such rights of
subrogation, contribution, reimbursement, indemnification and other rights or
recovery which it may now have or hereafter acquire.
5. MISCELLANEOUS.
-------------
5.1 CONTINUING GUARANTEE; INTENDED BENEFICIARIES. This Guarantee
--------------------------------------------
shall in all respects be a continuing guaranty, remaining in full force and
effect until the earliest of the following shall have occurred: (i) all of the
Liabilities have been satisfied in full; (ii) all of the Guarantor's obligations
hereunder have been satisfied in full; and (iii) the Buyer shall have no further
obligation to make any payment to the Trustee under the provisions of the
Pooling Agreement or Purchase and Sale Agreement. No notice of discontinuance
or revocation shall affect any of the obligations of the Guarantor hereunder or
any other obligor under any of the Liabilities. This Guarantee shall be solely
for the benefit of the Trustee and the Class A Certificateholders, and no other
Person shall have any rights or claims hereunder of any kind or nature.
5.2 SUCCESSORS AND ASSIGNS. All obligations under this Guarantee
----------------------
shall be binding upon the Guarantor's successors and assigns.
5.3 ASSIGNMENT BY THE TRUSTEE. Without the prior written consent of
-------------------------
the Guarantor, the Trustee may not assign or otherwise transfer any of its
rights or remedies hereunder to any Person; provided, however, that the
-------- -------
Guarantor hereby consents to the assignment of all of Trustee's rights and
remedies hereunder to any successor Trustee pursuant to the terms and provisions
of the Pooling Agreement.
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<PAGE>
5.4 LEGAL TENDER OF UNITED STATES. All payments hereunder shall be
-----------------------------
made in coin or currency which at the time of payment is legal tender in the
United States of America for public and private debts.
5.5 INTERPRETATIONS. All capitalized terms not otherwise defined
---------------
herein shall have the respective meanings given them in the Asset and Sale
Agreement. Captions contained in this Guarantee in no way define, limit or
extend the scope or intent of their respective provisions. Use of the
masculine, feminine or neuter gender and of singular and plural shall not be
given the effect of any exclusion or limitation herein. The use in this
Guarantee of the term "including", and related terms such as "include", shall in
all cases mean "without limitation".
5.6 NOTICES. Any notices that the Guarantor, the Trustee or the
-------
Servicer may give hereunder shall be in writing and shall be deemed given upon
the earlier of receipt via personal delivery or by facsimile transmission with
oral confirmation of receipt and contemporaneous mailing by first class United
States mail, or the third business day after being deposited by registered or
certified United States mail, postage prepaid, addressed to the recipient at its
address set forth above. Any party may specify another address for receipt of
notices hereunder by a notice given as provided herein.
5.7 NO MODIFICATION WITHOUT WRITING. No modification or waiver of
-------------------------------
any provision of this Guarantee, and no consent to any departure by the
Guarantor therefrom, shall be effective unless it is in writing and consented to
by the Guarantor, the Trustee and 100% of the holders of the Class A
Certificates, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
5.8 CAPTIONS; NONPAROL; SEVERABILITY. Captions are for convenience
--------------------------------
only and shall not affect the meaning of any term or provision of this
Guarantee. This Guarantee contains all the terms and conditions of the
agreement between the Trustee and the Guarantor relating to the subject matter
hereof. Each provision of this Guarantee shall be interpreted so as to be
effective and valid under applicable law, but if any provision of this Guarantee
shall in any respect be ineffective or invalid under such law, such
ineffectiveness or invalidity shall not affect the remainder of such provision
or the remaining provisions of this Guarantee.
5.9 CUMULATIVE. All rights and remedies of the Trustee and all
----------
obligations of the Guarantor under this Guarantee are cumulative. In addition,
the Trustee shall have all rights and remedies available to it in law or equity
for the enforcement of this Guarantee.
5.10 EFFECT OF DELAY OR ACTION. No delay by the Trustee in the
-------------------------
exercise of any right or remedy hereunder shall operate as a waiver thereof, and
no single or partial exercise by the Trustee of any right or remedy hereunder
shall preclude any other exercise thereof or the exercise of any other right or
remedy. No action of the Trustee permitted hereunder shall in any way impair or
otherwise affect any right of the Trustee or obligation of the Guarantor under
this Guarantee.
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<PAGE>
5.11 NONPETITION. The Guarantor hereby agrees for the benefit of the
-----------
Trustee that, prior to the date which is one year and one day after the
termination of the Purchase and Sale Agreement, it shall not institute against,
or join any other Person in instituting against, Seller any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings or other
proceedings under Federal or any State bankruptcy or insolvency law.
5.12 GOVERNING LAW. This Guarantee has been delivered at New York,
-------------
New York, and shall be construed under and governed by the internal laws and
decisions of the State of New York (without regard to conflicts of laws
principles).
[REMAINDER OF PAGE INTENTIONALLY BLANK; EXECUTION PAGE FOLLOWS]
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<PAGE>
IN WITNESS WHEREOF, the Guarantor has made this Guarantee as of the date
first above written.
HEALTHCARE FINANCIAL PARTNERS, INC.
By: /s/ Edward P. Nordberg, Jr.
----------------------------
Its: Executive Vice President
------------------------
ACKNOWLEDGED AND AGREED TO
as of June 25, 1997
FIRST BANK, NATIONAL ASSOCIATION, AS TRUSTEE
By:
-------------------------------
Its:
---------------------------
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<PAGE>
EXHIBIT 99.2
ASSIGNMENT AND ASSUMPTION AGREEMENT
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT (the "Assignment and Assumption")
is dated as of June 30, 1997 by and among HealthPartners Investors II, LLC, a
Delaware limited liability company (Assignor"), HCFP Funding II, Inc., a
Delaware corporation ("Assignee"), and HealthCare Financial Partners, Inc., a
Delaware corporation (the "Guarantor").
WITNESSETH:
WHEREAS, Assignor is the sole limited partner of that certain Delaware
limited partnership known as "HEALTHPARTNERS FUNDING II, L.P." (the
"Partnership"), which is currently governed by that certain Amended and Restated
Limited Partnership Agreement dated as of June 27, 1997 by and between Assignor,
as limited partner, and Assignee, as general partner (the "Partnership
Agreement"); and
WHEREAS, all capitalized terms used but not otherwise defined herein shall
have the respective meanings given them in the Partnership Agreement; and
WHEREAS, Assignor desires to assign to Assignee Assignor's entire limited
partnership interest as the sole limited partner of the Partnership (the
"Partnership Interest"), and Assignee desires to acquire the Partnership
Interest and in consideration therefor to pay to Assignor the Purchase Price (as
defined in Section 2 below); and
WHEREAS, the Guarantor has guaranteed the obligations of Assignee under the
Partnership Agreement pursuant to an Amended and Restated Guaranty Agreement
dated as of June 27, 1997 (the "Guaranty Agreement") between the Guarantor and
the Assignor; and
WHEREAS, immediately following the closing hereunder the Partnership shall
be terminated and dissolved and the assets of the Partnership distributed to
Assignee;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Sale. Subject to Section 2 hereof, effective on the Closing Date:
----
(i) Assignor hereby assigns, sells, transfers, conveys and sets over to Assignee
all of Assignor's right, title and interest in and to the Partnership Interest,
including, without limitation, all of Assignor's interest in the capital, the
profits and losses arising on or after the Closing Date, and all rights to
receive distributions of money, profits and other assets from the Partnership
and (ii) Assignee assumes and shall be solely responsible for the due and timely
performance of all obligations of Assignor under the Partnership Agreement
arising after the Closing Date. Assignor hereby represents and warrants to
Assignee that Assignor has not heretofore assigned, sold, transferred, conveyed
or hypothecated the Partnership Interest in whole or in part, to any person or
entity,
<PAGE>
and further represents and warrants to Assignee that it owns the Partnership
Interest free and clear of all liens, claims, charges and other encumbrances.
2. Purchase Price. The aggregate purchase price payable by Assignee in
--------------
consideration for the assignment and transfer of the Partnership Interest by
Assignor is $15,500,000 (the "Purchase Price"). The Purchase Price shall be paid
to Assignee on the Closing Date by wire transfer to Assignee's account as
previously instructed by Assignee.
3. Conditions. The obligations of Assignor under this Assignment and
----------
Assumption are subject to the fulfillment of each of the following conditions,
unless waived by Assignor in writing, at or before the closing (the "Closing";
and the date on which the Closing occurs is the "Closing Date") of the sale and
transfer of the Partnership Interest.
(a) Representations and Warranties. The representations and warranties of
------------------------------
the Guarantor and Assignee contained in this Assignment and Assumption shall be
true in all material respects on and as of the Closing Date with the same force
and affect as though made on and as of the Closing Date.
(b) Performance of Agreements. The Guarantor and Assignee shall have
-------------------------
performed and complied with all of their respective covenants and other
obligations contained in this Assignment and Assumption required to be performed
or complied with at or before the Closing Date.
(c) Consents. All consents required in connection with this Assignment and
--------
Assumption shall have been received by Assignee, the Guarantor and Assignor.
(d) Purchase Price. Assignor shall have received payment of the Purchase
--------------
Price payable under Section 2 hereof.
(e) Resolutions. The Guarantor and Assignee shall have duly adopted
-----------
resolutions approving this Assignment and Assumption and the transactions
contemplated hereby, and Assignor shall have received a certificate certifying
the adoption of such resolutions.
4. Acceptance of Assignment; Effective Date. Assignee hereby accepts the
----------------------------------------
assignment of the Partnership Interest, and agrees to be bound by all of the
terms and conditions of the Partnership Agreement applicable to Limited
Partners. Assignee hereby represents for the benefit of Assignor and the
Partnership that it is acquiring the Partnership Interest for its own account
and not with a view to the resale or distribution thereof, and agrees that it
will not transfer, sell or dispose of, or offer to transfer, sell or dispose of,
all or any portion of the Partnership Interest to any person or persons in any
manner that would violate or cause the Partnership to violate applicable Federal
or state securities laws. Assignor and Assignee agree
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<PAGE>
that the effective date of the assignment of the Partnership Interest shall be
June 30, 1997, and that the Closing shall occur on that date.
5. Covenants. Each party shall promptly upon request by the other party
---------
correct any defect or error that may be discovered in this Agreement or in any
document executed in connection herewith or in the execution, acknowledgment or
recordation of this Agreement any such document. Assignee hereby agrees to pay
the reasonable fees and expenses of counsel to Assignor in connection with the
transactions contemplated hereby.
6. Release. The parties hereto agree and acknowledge that upon
-------
consummation of the closing hereunder: (i) Assignor will have fully performed
all commitments and obligations under the Partnership Agreement and will have no
further commitments, obligations or liabilities thereunder, (ii) the Assignee
and the Guarantor will have fully performed all commitments and obligations to
Assignor under the Partnership Agreement and the Guaranty Agreement and will
have no further commitment, obligations or liabilities thereunder to Assignor
and (iii) Assignor will have no further rights under the Partnership Agreement
or the Guaranty Agreement, except the right to receive the Purchase Price.
7. Representations and Warranties of Assignee. The Guarantor and Assignee
------------------------------------------
represent and warrant to Assignor as of the date hereof and as of the Closing
Date as follows:
(a) Corporate Existence and Power. Each of the Guarantor and Assignee (i)
-----------------------------
is a corporation duly incorporated, validly existing and in good standing under
the laws of the jurisdiction of its incorporation and (ii) has all necessary
corporate power and authority to execute and deliver this Assignment and
Assumption and to consummate the transactions contemplated hereby.
(b) Authorization; Binding Effect. The execution and delivery by each of
-----------------------------
the Guarantor and Assignee of this Assignment and Assumption, the performance by
each of their respective obligations under this Assignment and Assumption, and
the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action. This Assignment and Assumption has
been duly executed and delivered by the Guarantor and Assignee and is the legal,
valid and binding obligation of the Guarantor or Assignee, as the case may be,
enforceable against it in accordance with its terms.
(c) Contravention. Neither the execution, delivery and performance of this
-------------
Assignment and Assumption by the Guarantor or Assignee nor the consummation of
the transactions contemplated hereby will (with or without notice or lapse of
time or both) (i) conflict with, violate or breach any provision of the
certificate of incorporation or bylaws of the Guarantor or Assignee, (ii)
violate, conflict with or result in a breach of any writ, judgment, injunction,
order, decree or award of any governmental body by which either the Guarantor or
Assignee or their respective properties may be bound or affected, or (iii)
conflict with, result in a default under, or give rise to a right of
termination, cancellation, or acceleration or to a loss
-3-
<PAGE>
of a benefit under any material agreement to which Assignee or the Guarantor is
a party or by which Assignee or the Guarantor or their respective properties may
be bound or affected.
(d) Approvals. No authorization, consent, order or approval of, notice to,
---------
registration or filing with, or any other action by, any person, entity or
governmental body is required in connection with (a) the due execution and
delivery by Assignee or the Guarantor of this Assignment and Assumption, (b) the
consummation of the transactions contemplated hereby, or (c) the performance by
Assignee and the Guarantor of their respective obligations hereunder.
(e) Capital Account of Assignor. Assignee hereby represents and warrants
---------------------------
that the capital account balance of Assignor as of June 30, 1997, after giving
effect to profits of the Partnership through such date, is $13,855,654.13.
8. Applicable Law. This Assignment and Assumption shall be interpreted,
--------------
construed and enforced in accordance with the laws of the State of Delaware.
9. Successors and Assigns. This Assignment and Assumption shall be
----------------------
binding upon and shall inure to the benefit of Assignor, the Guarantor and
Assignee and their respective legal representatives, successors and assigns.
10. Severability. Should any part of this Assignment and Assumption for
------------
any reason be declared or held invalid, unenforceable or illegal, such
invalidity, unenforceability, or illegality shall not affect the validity of any
remaining portion, which remaining portion shall remain in force and effect as
if this Assignment and Assumption had been executed with the invalid,
unenforceable or illegal portion thereof eliminated.
11. Integration. This Assignment and Assumption contains the final and
-----------
entire agreement between the parties thereto with respect to the assignment and
transfer of the Partnership Interest, and is intended to be an integration of
all prior negotiations and understandings. The parties make no representations,
warranties, covenants, express or implied, except as expressly set forth herein.
No change or modification of this Assignment and Assumption shall be valid
unless the same is in writing and is signed by the party against which it is
sought to be enforced.
12. No Waiver; Remedies. No failure or delay by any party in exercising
-------------------
any right, power or privilege under this Assignment and Assumption will operate
as a waiver of the right, power or privilege. A single or partial exercise of
any right, power or privilege will not preclude any other or further exercise of
the right, power or privilege or the exercise of any other right, power or
privilege. The rights and remedies provided in this Assignment and Assumption
will be cumulative and not exclusive of any rights or remedies provided by law.
-4-
<PAGE>
13. Counterparts. This Assignment and Assumption may be executed in
------------
counterparts, each of which shall constitute an original and both of which, when
taken together, shall constitute a single instrument.
14. Descriptive Headings. The headings in this Assignment and Assumption
--------------------
are included for convenience of reference only and will not affect in any way
the meaning or interpretation of this Assignment and Assumption.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Assignment and Assumption of Partnership Interest as of the date first above
written.
ASSIGNOR:
HEALTHPARTNERS INVESTORS II, LLC,
a Delaware limited liability company
By: Farallon Capital Management, L.L.C.,
its Manager
By: /s/ Edward P. Nordberg, Jr.
-----------------------------------
Name: Edward P. Nordberg, Jr.
------------------------------
Title: Executive Vice President
-----------------------------
ASSIGNEE:
HCFP FUNDING II, INC.,
a Delaware corporation
By: /s/ Edward P. Nordberg, Jr.
-----------------------------------
Name: Edward P. Nordberg, Jr.
------------------------------
Title: Executive Vice President
-----------------------------
GUARANTOR:
HEALTHCARE FINANCIAL PARTNERS, INC.,
a Delaware corporation
By: /s/ Edward P. Nordberg, Jr.
-----------------------------------
Name: Edward P. Nordberg, Jr.
------------------------------
Title: Executive Vice President
-----------------------------
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